I thought that Congress renewed the tuition and fees deduction this year, but there isn't any space on my tax form to report it. I thought that I would qualify for that deduction. How can I take the tax break when I file my taxes?
You're absolutely right. Congress did renew the tuition and fees deduction, but it acted so late in the year -- it wasn't signed into law until late December -- that the 2006 tax forms had already been printed. You'll need to follow special instructions to take the write-off because you won't find a separate line in the 1040 for the deduction.
If you file the paper forms, write "T" and enter your write-off on line 35, which is labeled "domestic production activities deduction." If you use tax-preparation software like TurboTax, be sure to download the most recent updates.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Because of the missing line on the tax form, this deduction is easy to overlook this year -- but can be quite valuable. If you paid college tuition for yourself, your spouse or a dependent in 2006, you may be able to deduct up to $4,000 in college tuition and fees -- which could lower your tax bill by up to $1,000 if you're in the 25% tax bracket.
To qualify for the full deduction, your adjusted gross income must be $130,000 or less in 2006 if married filing jointly ($65,000 or less if single). You can deduct up to $2,000 in tuition and fees if your joint income was $160,000 or less ($80,000 or less if single). There is no deduction if you earn more than that. You don't need to itemize to qualify.
This deduction can be helpful if you earn too much money to qualify for a Hope or lifetime learning credit, which are more valuable (you can't take the tuition deduction in the same year you take the Hope or lifetime learning credit). The Hope credit can lower your tax bill by up to $1,650 per child in the first two years of college; the lifetime learning credit can reduce your taxes by up to $2,000 after that. But you can only take these credits if you're married filing jointly and earn less than $110,000; or $55,000 for single filers.
For more information about these tax breaks for college tuition, see IRS Publication 970 Tax Benefits for Education. For more information about the filing rules for several last-minute tax-law changes, see the IRS's update.
-
You Don’t Want to Retire in Portugal: Here Are Three Tax Reasons WhyRetirement Taxes With the NHR benefit retiring and pension taxes increasing, you might rethink your retirement plans in Portugal.
-
Home Depot's Winning Ways Fueled Its 100,000% ReturnHome Depot's wide moat leaves little room for competition – and shareholders have profited as a result.
-
New Colorado Tax Credit: What’s the Scoop?State Tax Everything you need to know about the Colorado family affordability tax credit in 2025.
-
Key Family Tax Breaks Are on the GOP Chopping Block This YearTax Credits Several tax breaks, including the Child Tax Credit, may face reforms or be cut entirely as lawmakers seek revenue for Trump’s tax plans.
-
What's Going on With New Jersey Property Tax Programs?Property Tax ANCHOR and ‘Senior Freeze’ just got a refresh, and there’s a new program: Stay NJ. Learn how to save on New Jersey property taxes.
-
Five States With the Largest EITC ChecksEITC Households in these states received a larger Earned Income Tax Credit (EITC) last year.
-
Downsize in Retirement With 2025 Tax Benefits: Three Key StrategiesRetirement Taxes Downsizing retirees may benefit from tax savings, lower utility bills, and freed-up income. But could a new presidency impact your home sale?
-
Gov. Hochul Vows to Deliver $1 Billion in Tax Relief to New YorkersState Tax The proposed tax cuts would benefit New York middle-class families.
-
Maryland Property Tax Assessment: What It Means for YouState Tax Amid a growing deficit, Maryland property values are rising. Here’s more of what to know.
-
The American Opportunity Tax Credit (AOTC): How Much Is It Worth?Tax Credits This tax break can help you offset $2,500 in qualifying expenses tied to your higher education. Here's what you need to know.
