Keeping track of your college expenses can be an asset come tax time. Learn which ones you can deduct.
Deductible Expenses
You (or your parents) get to take a deduction for some of those expensive college items. Educational expenses which are tax deductible include:
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tuition
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correspondence courses
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books
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supplies
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laboratory fees
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formal training or research as part of an educational program.
Transportation and travel expenses to attend qualified educational activities may also be deductible.
Student Loans
In some instances, you may be able to deduct interest payments on a qualified student loan. You cannot claim a deduction for loan interest if a relative gave you the loan. If your student loan is canceled (forgiven), you may have to report the forgiven amount as gross income. You cannot deduct student loan interest if someone else claims your exemption on their return.
Education Savings Bond
You may be able to exclude from your gross income all or part of the interest you received on the redemption of qualified U.S. Savings Bonds if you used the money to pay for qualifying education. This exclusion is known as the Education Savings Bond Program.
Financial Aid
When applying for financial aid you may be asked for a copy of your federal income tax return. If you previously filed one of the 1040 forms (1040, 1040A or 1040EZ), then you may use IRS form 4506 to have the IRS send a copy of your tax return to you or a third party.
Scholarships and Fellowships
Scholarships are generally tax-free if used for qualifying tuition and course-related expenses during the grant period. To be sure, consult the grantor of your scholarship or fellowship.
Required Education
(either by your employer or the law)
If your education is required by law or by your employer to keep your present salary, status, or job then you may be able to claim the expenses as a deduction. The required education must serve a legitimate business purpose for your employer. You may also take an educational deduction if the education maintains or improves skills needed in your present work.
You can deduct the cost of qualifying education only if you were not reimbursed by your employer or if the costs exceeded your reimbursement. To be able to deduct work-related educational expenses, you must be currently employed.
However, if the education is needed to just meet the minimum educational requirements of your present job, or that education will qualify you for a new trade or career you can not deduct the educational expenses.
Employer-Provided Educational Assistance
Some employers offer an Educational Assistance Program. You can deduct some educational assistance benefits on your tax return; to qualify, the plan must be put in writing. Tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and some equipment.
Recordkeeping
You need to keep records of any deduction claimed on your tax return. Below are some examples of what you should keep:
1. Documentation of enrollment dates (e.g. transcripts, course descriptions, catalogs, etc.)
2. Documentation of subjects studied along with descriptions of educational activity
3. Receipts for tuition and books
4. Receipts for meals and lodging while away overnight for educational purposes
5. Receipts for travel and transportation
6. Complete information about scholarship or fellowship grants, including amounts you received during the year
If you are taking classes because of your job, keep statements from your employer explaining that the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; and how much reimbursement you received.
