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Taxmap/pub17/p17-100.htm#TXMP1ff47f35 Chapter 21 Education-   Related   Adjustments

Education- Related Adjustments

Taxmap/pub17/p17-100.htm#TXMP007094f5 What's New

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Educator expenses.

The provision for educator expenses was to have expired at the end of 2003, but the Working Families Tax Relief Act of 2004 extended this provision until the end of 2005. You can deduct up to $250 of qualified expenses as an adjustment to gross income in 2004 and 2005. See Educator Expenses for more information.

Taxmap/pub17/p17-100.htm#TXMP5b1b5371
Student loan interest deduction.

Final regulations, issued May 7, 2004, made the following changes to the rules for deducting student loan interest. These changes apply to interest due and paid on qualified student loans after December 31, 1997.

Longer period allowed for loan disbursement. The 60-day safe harbor for disbursing loan proceeds used to pay qualified education expenses has been increased to 90 days before and 90 days after the academic period to which the expenses relate. See Reasonable period of time for more information.

Interest paid by a third party may be deductible. The person legally obligated to make interest payments on a student loan may be able to deduct interest payments on that loan made by someone else (third party). For more information, see Expenses paid by others.

If you are affected by either of these changes, you may want to file Form 1040X, Amended U.S. Individual Income Tax Return, to correct a return you have already filed. Generally, you must file your claim for a refund within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later.

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Maximum tuition and fees deduction increases to $4,000.

Beginning in 2004, the amount of qualified education expenses you can take into account in figuring your tuition and fees deduction increases from $3,000 to $4,000 if your modified adjusted gross income (MAGI) is not more than $65,000 ($130,000 if you are married filing jointly). If your MAGI is larger than $65,000 ($130,000), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum tuition and fees deduction is $2,000. No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000).

Introduction

This chapter discusses the education-related adjustments you can deduct in figuring your adjusted gross income.

This chapter covers:

• Educator expenses,
• Student loan interest deduction, and
• The tuition and fees deduction.

Useful items

You may want to see:

Taxmap/pub17/p17-100.htm#TXMP08183d05 Educator Expenses

Educator Expenses

If you were an eligible educator in 2004, you can deduct up to $250 of qualified expenses you paid in 2004. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses.

Taxmap/pub17/p17-100.htm#TXMP5d4723b0 Eligible educator.

An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

Taxmap/pub17/p17-100.htm#TXMP22ccf7c9 Qualified expenses.

Qualified expenses.

Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary.

Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education.

You must reduce your qualified expenses by the following amounts.

• Tax-free interest on U.S. series EE and I savings bonds (Form 8815). See Figuring the Tax-Free Amount in chapter 10 of Publication 970.
• Tax-free portion of a distribution from a qualified tuition program (QTP). See Figuring the Taxable Portion of a Distribution in chapter 8 of Publication 970.
• Tax-free portion of a distribution from a Coverdell education savings account (ESA). See Figuring the Taxable Portion of a Distribution in chapter 7 of Publication 970.
• Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2.

Taxmap/pub17/p17-100.htm#TXMP7c737536 How the deduction is claimed.

How the deduction is claimed.

To claim the deduction, enter the allowable amount on line 23 of Form 1040, or line 16 of Form 1040A.

Previous Page:  Publication 17 - Your Federal Income Tax - Recapture Rule Next Page:  Publication 17 - Your Federal Income Tax - Student Loan Interest Deduction Use     to find additional instances of index items.