In addition to counting qualified education expenses paid for academic periods the previous tax year, you also can claim eligible expenses you paid last year to cover school sessions that begin during the first three months of this tax year. For example, if you paid $1,500 last December for course work that begins March 1, that prepayment can count in figuring your current deduction amount.
This tax break can be claimed on 2013 returns, but unless Congress renews it, it's no longer in effect for the 2014 tax year or beyond.
Applies only to specific expenses
The deduction, however, is not without limits.
Note the name. Only payments for tuition and fees count. No room, board or, in most cases, book costs are eligible.
Also, be sure your courses pass Internal Revenue Service inspection. In addition to being college-level, they must be for legitimate educational reasons. Sport, hobby or noncredit courses don't qualify unless the class is required as part of a degree program; for example, an archery class necessary to earn your bachelor's in physical education.
Did you use other tax-advantaged education funds to pay your schooling costs? Those distributions could reduce, or possibly eliminate, this tuition-and-fees tax deduction. If you used money from a state tuition plan, a Coverdell educational savings account or interest on savings bonds you cashed to pay for class, you have to subtract those amounts from your expenses to arrive at the allowable deductible amount.
Some filing-status issues need to be considered. Married couples, for example, must file a joint return to take this deduction.
If you're a college student who is claimed as a dependent on your parents' return, be careful when it comes to this tax break. You can't take the deduction yourself even if you paid your tuition with your own money. In this case, neither you nor your parents get the deduction. And even if your parents don't claim you as a dependent, if they can, that possibility alone means you can't take the tuition-and-fees tax break.
Then there are the money limits.
The tuition-and-fees deduction could be as much as $4,000. This amount, however, applies to all qualified expenses paid last year, not paid per student.
So you can't claim the $4,000 spent toward your MBA course work and another $4,000 you paid for your daughter's freshman year at State U. (However, if your course work is employment-related, you might be able to claim it as a miscellaneous expense on Schedule A. Remember, though, you'll have to meet the 2 percent of adjusted gross income threshold for the schooling costs to be of any itemized tax benefit.)