Qualified Expenses

• You can only deduct tuition expenses incurred during the current school year, which can start up to three months after the following year. In general, only required tuition and fees count as a qualified higher education expense, including books and supplies unless you must purchase them directly from the institution. Even if you need transportation and room for schooling, you cannot include them as an expense because they have personal uses. You must subtract scholarships and grants from your qualified expenses.
  
  

Income Limit

• The IRS sets an income limit on the tuition tax deduction. As of 2011, single payers cannot make more than $80,000 to take this deduction. If you make between $65,000 and $80,000, the IRS limits the deduction $2,000. For married couples, the phaseout occurs between a gross income of $130,000 to $160,000. If you file married but separately, you cannot take this deduction.
  
  

Double-Dipping

• You cannot claim more than one education tax credit or deduction per child. Thus, you must choose the education tax break that gives you the lowest tax bill. You also cannot deduct expenses paid for with tax-free funds, such as those from a 529 college savings plan or proceeds from redeeming a U.S. savings bond. A tax credit usually results in the lowest tax bill because it is a dollar-for-dollar reduction, while a deduction only reduces taxable income.
  
  

Tip

• To claim the tuition tax deduction, fill out Form 8917 and attach it to your 1040. You may have to make some adjustments to your tuition expenses. For instance, you must deduct the foreign housing deduction and employer-paid tuition from your education expenses. The line on which you claim tuition expenses changes from year to year. In 2010, you claim it on line 34.