Smith & Gesteland Quick Tip

Higher Education Deduction Introduced

The Tax Act of 2001 introduces a new tax deduction for qualified tuition and related expenses. With its higher income eligibility limits, this deduction is likely to benefit those taxpayers with incomes too high to get much, if any, benefit from the Hope or Lifetime Learning credits. Beginning in 2002 and continuing in 2003, you can deduct up to $3,000 of qualifying higher education expenses if your AGI is $65,000 or less for a single filer, and $130,000 or less for joint filers. In 2004 and 2005, the deduction increases to $4,000. There is also a provision that makes taxpayers with even a higher AGI ($80,000 for singles and $160,000 for joint filers) eligible for a $2,000 deduction, but only in 2004 and 2005. The tuition tax break is an above-the-line deduction so you won't need to itemize in order to benefit.