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TAX TIP: REMEMBER THE TUITION DEDUCTION

April 03, 2007

You can look all day at your Form 1040 in search of the line used for taking the deduction for higher education expenses. It's pretty subtle. It's on line 35, labeled "Domestic production activities deduction."

Yes, that seems strange. Blame Congress. The deduction was slated to expire at the end of 2005, but Congress extended it through 2007 after the 2006 forms went to the printer. An IRS news release explains how you claim the deduction:

Higher Education Tuition and Fees Deduction

Claim the deduction for up to $4,000 in higher education tuition and fees on Form 1040, Line 35, “Domestic production activities deduction.”

Enter "T" on the blank space to the left of that line entry if claiming the tuition and fees deduction, or "B" if claiming both a deduction for domestic production activities and the deduction for tuition and fees. For those entering "B," attach a breakdown showing the amounts claimed for each deduction.

The deduction is available "above the line," whether or not you itemize and whether or not you have alternative minimum tax. It phases out when AGI exceeds $65,000 for single filers and $130,000 for joint filers. It doesn't apply in a year when you claim a Hope credit or lifetime learning credit for the same student.

This is another installment in our daily series of 2007 filing season tax tips.

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