Learning Center

Above-the-Line Education Tax Deduction Reinstated

Article Highlights:

  • Appropriations Act of 2020
  • History of the Deduction
  • Other Education Expense Benefits
  • Which Tax Break Provides the Best Benefit
On December 20, 2019, President Trump signed into law the Appropriations Act of 2020, which included a number of tax law changes, among them retroactive extension of certain tax provisions that expired after 2017 or were about to expire, several retirement and IRA plan modifications, and other changes that will, as a whole, impact a large portion of U.S. taxpayers. This article is one of a series of articles dealing with those changes and how they may affect you.

Looking back a few years, a taxpayer who had higher education expenses could generally take advantage of four* possible tax benefits: an itemized deduction if the education was job-related, a higher education tuition and expenses tax credit using either the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Tax Credit (LLC), or an above-the-line deduction for higher education tuition and fees. However, the 2017 tax reforms did away with the itemized deduction through 2025, and Congress allowed the above-the-line deduction for higher education tuition and fees to expire at the end of 2017, leaving only the two education credits as options.

As part of the Appropriations Act of 2020, Congress has retroactively reinstated the above-the-line deduction for 2018 through 2020.

For purposes of the higher education expense deduction, "qualified tuition and related expenses" generally has the same definition, with certain exceptions, as the AOTC and LLC use for higher education expenses, including tuition and fees paid for an eligible student attending school at an eligible higher education institution. The deduction can be claimed for the taxpayer, the taxpayer’s spouse or a dependent of the taxpayer for attending an eligible higher education institution. The deduction, up to $2,000 or $4,000 depending on adjusted gross income (AGI), is not allowed for joint filers with an AGI of $160,000 or more ($80,000 for other filing statuses, although no credit is allowed for taxpayers using the married filing separate status). These phase-out amounts are not inflation-adjusted.



Thus, taxpayers now have three* optional tax benefits for post-secondary education expenses, and the rules related to each are different. Although one of the education tax credits will generally provide the greatest benefit, deciding which option is best can sometimes be complex. Each has a different AGI phase-out limitation, and the AOTC, besides only applying to the first 4 years of post-secondary education, has an additional half-time student requirement. The above-the-line deduction, on the other hand, reduces AGI, and because AGI often limits other benefits on a tax return, the effect of a lowered AGI on other elements of the return needs to be considered.

If you have questions related to the extended above-the-line education deduction, please give this office a call.

*There is actually an additional possibility for self-employed individuals who have business-related education expenses. These costs may be claimed as a business expense in lieu of an education credit or the personal above-the-line deduction.

If you missed any of the earlier tax law change articles you can view those articles at the links below:

Share this article...

NEVER MISS A STORY.

Sign up for our newsletters and get our articles delivered right to your inbox.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .

Social Media

Rose Tax & Financial

8 Pinon Ave
Cedar Crest, New Mexico 87008
Mon - Fri: 10:00am to 6:00pm
Sat: 10:00am to 2:00pm

Check the background of your financial professional on FINRA's BrokerCheck
Avantax affiliated Financial Professionals may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state. Securities offered through Avantax Investment Services℠, Member FINRA, SIPC, Investment Advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through an Avantax affiliated insurance agency. 3200 Olympus Blvd., Suite 100, Dallas, TX 75019. 972-870-6000.
The Avantax family of companies exclusively provide financial products and services through its financial representatives. Although Avantax Wealth Management® does not provide or supervise tax or accounting services, Avantax representatives may offer these services through their independent outside business. Content, links, and some material within this website may have been created by a third party for use by an Avantax affiliated representative. This content is for educational and informational purposes only and does not represent the views and opinions of Avantax Wealth Management® or its subsidiaries. Avantax Wealth Management® is not responsible for and does not control, adopt, or endorse any content contained on any third party website.
This information is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences.
For Important Information and Form CRS please visit https://www.avantax.com/disclosures.

FAQs Frequently Asked Questions
Type your message here.
Please fill out the form and our team will get back to you shortly The form was sent successfully