You cannot deduct higher
education expenses on your income tax return if you or anyone else
claims a Hope or Lifetime learning credit based on those SAME expenses.
You cannot claim a deduction or credit based on expenses paid with
tax-free scholarship, fellowship, grant, or education savings account
funds such as a Coverdell education savings account, tax-free savings
bond interest or employer-provided education assistance. The same rule
applies to expenses you pay with a tax-exempt distribution from a
qualified tuition plan, except that you can deduct qualified expenses
you pay only with that part of the distribution that is a return of your
contribution to the plan. Also, you cannot deduct qualified education
expenses you deduct anywhere else on your return, such as a business
expense. Refer to Topics 310,
403 and
421.
In 2004, if your modified adjusted gross income (MAGI) does not exceed
$65,000 ($130,000 if married filing jointly) you are entitled to a
maximum deduction of $4,000 per year. If your MAGI is greater than
$65,000 ($130,000), but is not more than $80,000 ($160,000 if you are
married filing jointly), your maximum tuition and fees deduction is
$2,000. No tuition and fees deduction is allowed if your MAGI is larger
than $80,000 ($160,000).
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