Include as Interest

In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest.

Loan origination fee. In general, this is a one-time fee charged by the lender when a loan is made. To be deductible as interest, the fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. A loan origination fee treated as interest accrues over the life of the loan.

Capitalized interest. This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan.

Interest on revolving lines of credit. This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. See Qualified Education Expenses, earlier.

Interest on refinanced student loans. This includes interest on both:

• Consolidated loans—loans used to refinance more than one student loan of the same borrower, and
• Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan.

Do Not Include as Interest

You cannot claim a student loan interest deduction for any of the following items.

• Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments.
• Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs.
• Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. For more information, see Student Loan Repayment Assistance1 in chapter 5 of Pub. 970.

No Double Benefit Allowed

You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, home mortgage interest).

Who Can Claim the Deduction?

Generally, you can claim the tuition and fees deduction if all three of the following requirements are met.

1. You pay qualified education expenses of higher education.
2. You pay the education expenses for an eligible student.
3. The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption (defined in chapter 3) on your tax return.

The term “qualified education expenses” is defined later under Qualified Education Expenses. “Eligible student” is defined later under Who Is an Eligible Student. For more information on claiming the deduction for a dependent, see Who Can Claim a Dependent’s Expenses,later.

Who Cannot Claim the Deduction?

You cannot claim the tuition and fees deduction if any of the following apply.

• Your filing status is married filing separately.
• Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
• Your modified adjusted gross income (MAGI) is more than $80,000 ($165,000 if filing a joint return).
• You (or your spouse) were a nonresident alien for any part of 2017 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Pub. 519, U.S. Tax Guide for Aliens.

Qualified Education Expenses

For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution.

Eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions.

An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in a student aid program administered by the U.S. Department of Education.

Related expenses. Student activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses for the tuition and fees deduction only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.

Prepaid expenses. Qualified education expenses paid in 2017 for an academic period that begins in the first three months of 2018 can be used in figuring an education credit for 2017 only. See Academic period, earlier.

No Double Benefit Allowed

You cannot do any of the following.

• Deduct qualified education expenses you deduct under any other provision of the law, for example, as a business expense.
• Deduct qualified education expenses for a student on your income tax return if you or anyone else claims an American opportunity or lifetime learning credit for that same student in the same year.
• Deduct qualified education expenses that have been used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program. See Coordination with Tuition and Fees Deduction in chapter 8 of Pub. 970.
• Deduct qualified education expenses that have been paid with tax-free interest on U.S. savings bonds (Form 8815). See Figuring the Tax-Free Amount in chapter 10 of Pub. 970.
• Deduct qualified education expenses that have been paid with tax-free educational assistance such as a scholarship, grant, or assistance provided by an employer. See the following section on Adjustments to qualified education expenses.

Adjustments to qualified education expenses. For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. The result is the amount of adjusted qualified education expenses for each student.

Tax-free educational assistance. For tax-free educational assistance you received in 2017, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance to that academic period. See Academic period, earlier.

Some tax-free educational assistance received after 2017 may be treated as a refund of qualified education expenses paid in 2017. This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2017 for qualified education expenses paid on behalf of a student in 2017 (or attributable to enrollment at an eligible educational institution during 2017).

If this tax-free educational assistance is received after 2017 but before you file your 2017 income tax return, see Refunds received after 2017 but before your income tax return is filed, later. If this tax-free educational assistance is received after 2017 and after you file your 2017 income tax return, see Refunds received after 2017 and after your income tax return is filed, later.

This tax-free educational assistance includes:

• The tax-free part of scholarships and fellowship grants (see Tax-Free Scholarships and Fellowship Grants in chapter 1 of Pub. 970),
• The tax-free part of Pell grants (see Pell Grants and Other Title IV Need-Based Education Grantsin chapter 1 of Pub. 970),
• Employer-provided educational assistance (see chapter 11 of Pub. 970),
• Veterans’ educational assistance (see chapter 1 of Pub. 970), and
• Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.

Generally, any scholarship or fellowship you receive is treated as tax-free educational assistance. However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent the student includes it in gross income (the student may or may not be required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true:

• The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 970, chapter 1.
• The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 970, chapter 1.

Refunds. A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Some tax-free educational assistance received after 2017 may be treated as a refund. See Tax-free educational assistance, earlier.

Refunds received in 2017. For each student, figure the adjusted qualified education expenses for 2017 by adding all the qualified education expenses for 2017 and subtracting any refunds of those expenses received from the eligible educational institution during 2017.

Refunds received after 2017 but before your income tax return is filed. If anyone receives a refund after 2017 of qualified education expenses paid on behalf of a student in 2017 and the refund is paid before you file an income tax return for 2017, the amount of qualified education expenses for 2017 is reduced by the amount of the refund.

Refunds received after 2017 and after your income tax return is filed. If anyone receives a refund after 2017 of qualified education expenses paid on behalf of a student in 2017 and the refund is paid after you file an income tax return for 2017, you may need to repay some or all of the credit. See Credit recapture, later.

Coordination with education savings bonds,Coverdell education savings account, and qualified tuition programs. Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program.

Credit recapture. If any tax-free educational assistance for the qualified education expenses paid in 2017 or any refund of your qualified education expenses paid in 2017 is received after you file your 2017 income tax return, you must recapture (repay) any excess credit. You do this by refiguring the amount of your adjusted qualified education expenses for 2017 by reducing that amount by the amount of the refund or tax-free educational assistance. You then refigure your education credit(s) for 2017 and figure the amount by which your 2017 tax liability would have increased if you had claimed the refigured credit(s). Include that amount as an additional tax for the year the refund or tax-free assistance was received.

Amounts that do not reduce qualified education expenses. Do not reduce qualified education expenses by amounts paid with funds the student receives as:

• Payment for services, such as wages,
• A loan,
• A gift,
• An inheritance, or
• A withdrawal from the student’s personal savings.

Do not reduce the qualified education expenses by any scholarship or fellowship grant reported as income on the student’s tax return in the following situations.

• The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1 of Pub. 970.
• The use of the money is not restricted.

Expenses That Do Not Qualify

Qualified education expenses do not include amounts paid for:

• Insurance,
• Medical expenses (including student health fees),
• Room and board,
• Transportation, or
• Similar personal, living, or family expenses.

This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.

Sports, games, hobbies, and noncredit courses. Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. However, if the course of instruction or other education is part of the student’s degree program, these expenses can qualify.

Comprehensive or bundled fees. Some eligible educational institutions combine all of their fees for an academic period into one amount. If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. See Figuring the Deduction, later, for more information about Form 1098-T.

Who Is an Eligible Student

For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (defined earlier).

Who Can Claim a Dependent’s Expenses

Generally, in order to claim the tuition and fees deduction for qualified education expenses for a dependent, you must:

• Have paid the expenses, and
• Claim an exemption for the student as a dependent.

For you to be able to deduct qualified education expenses for your dependent, you must claim an exemption for that individual. You do this by listing your dependent’s name and other required information on Form 1040 (or Form 1040A), line 6c.

Expenses paid by dependent. If your dependent pays qualified education expenses, no one can take a tuition and fees deduction for those expenses. Neither you nor your dependent can deduct the expenses. For purposes of the tuition and fees deduction, you aren’t treated as paying any expenses actually paid by a dependent for whom you or anyone other than the dependent can claim an exemption. This rule applies even if you don’t claim an exemption for your dependent on your tax return.

Expenses paid by you. If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring your tuition and fees deduction.

Expenses paid under divorce decree. Qualified education expenses paid directly to an eligible educational institution for a student under a court-approved divorce decree are treated as paid by the student. Only the student would be eligible to take a tuition and fees deduction for that payment, and then only if no one else could claim an exemption for the student.

Expenses paid by others. Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student’s qualified education expenses. In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. If you claim, or can claim, an exemption on your tax return for the student, you aren’t considered to have paid the expenses and you can’t deduct them. If the student isn’t a dependent, only the student can deduct payments made directly to the institution for his or her expenses. If the student is your dependent, no one can deduct the payments.

Tuition reduction. When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1 of Pub. 970.