What is the best way to claim tuition expenses?

My wife is a graduate student. Her tuition was $5500+ and books and supplies were around $1500. Which is the best path to take– Tuition & Fee Deduction (form 8917) or Education and Hope Credit (form 8863). Are both possible?
My income (or lack there of) qualifies me for both.

Comments

  1. Growl says

    File one or the other, but not both.

    Actually you should prepare both ways and file the one that gives you the most money.

  2. ninasgramma says

    You can take either the Tuition and Fees Deduction or the Lifetime Learning Credit, not both, for the same student.

    If your income qualifies for the LLC, you will get a credit of 20% of the tuition paid, or about $1,100. This will reduce taxes you owe but will not give you money back.

    If your income qualifies for the T/F deduction, you can take a deduction of up to $4,000 from your income before taxes are figured.

    The T/F deduction is going to be better if your income tax bracket is over 25% or if your income is too high for the credit.

    The LLC is available to taxpayers filing a joint return with modified AGI under $94,000. The credit is phased out above $114,000.

    The T/F deduction is available to taxpayers filing a joint return with modified AGI under $130,000. The credit is phased out above $160,000.

    Books and supplies do not qualify for either benefit.

  3. Robert in Nuuanu says

    This is a complicated question. It depends on your income and the nature of the courses.
    She is not eligible for the Hope credit, it is only for Freshman and Sophomores.
    If the Tuition deduction drops you into a lower tax bracket it may be best.
    The Lifetime learning credit is generally more advantageous than the deduction, but subject to the effect on tax bracket.
    You can claim either the tuition deduction or the Lifetime Credit, but not both.
    If the courses are related to her job, she may be able to claim Misc Business Expense for the balance of the expenses that do not qualify for either the deduction or the Lifetime Credit, in addition.
    The fee to have a Tax Pro figure this out is much less than the refund he/she will get you.