The tuition deduction or a higher education tax credit—you can only claim one or the other—is likely just a drop in the bucket if you’re paying for a child to attend an elite school. And the deduction and credits phase out for higher-income taxpayers. But that doesn’t mean you can’t wring any tax benefits out of tuition payments.
Strategy: Obtain a breakdown in writing of how tuition is spent by the college. If the school allocates a portion of the cost to health insurance services, you can treat that amount as a deductible medical expense as long as the student (your child) qualifies as your dependent.
Granted, it’s tough to overcome the new higher medical expense threshold of 10% of adjusted gross income (AGI) in 2013. (The deduction threshold generally increases from 7.5% of AGI in 2012.) However, if this is a heavy year for medical expenses in your family, the allocable tuition cost can pad your total or maybe put you over the hump.
But note that the cost is deductible only if the school provides the breakdown or it is “readily obtainable.”
What’s more, when a child attends a special school for a learning or other disability—for example, if the child is hearing-impaired and requires special instruction—the parents can treat the entire tuition cost as a medical expense.
Tip: Other health insurance costs of your children may also qualify for the medical deduction.
- Small Business Tax Deduction Strategies No matches