With the rising cost of college tuition, it is important to know what tax benefits are available to those who pay for higher education. There are state and federal tax benefits offered to reduce your income during tax time. It doesn't matter if you are paying college tuition for yourself or a dependent, these special benefits can still apply.
Understand that college tuition is tax deductible because it qualifies as a "qualified education expense." These expenses include student activity fees, class books and school supplies. They are deductible only as a requirement of enrollment or attendance and it must be for higher education.
Deduct tuition and fees on your tax return for the year you paid it. Monies paid for tuition and fees are deductible in an academic period when you filed your return, or during the initial three months of the upcoming year. If you pay college tuition for a spouse in November, for a winter semester starting in January of the following year, it is tax deductible for the year you paid it.
Know that the tuition and fees deduction can not be claimed if you are married filing separately. Nonresident aliens are not able to claim this deduction even if married to a United States citizen.
Claim the maximum deduction for the tax deduction if your modified adjusted gross income up to $65,000 or $130,000 if married filing jointly. There is a maximum deduction of $4,000. If your MAGI are from $65,001 to $80,000, or $130,001 to $160,000 for married filing jointly, then your maximum deduction is $2,000. If your MAGI is higher than $80,000, you are not able to claim the deduction.
Read your states Section 529 savings plan if you are actively contributing to one. Some states will allow you to deduct some or all of your contributions if you reside in the state of the plan you are contributing too.