College eduction, whether private or public, is never cheap, but the IRS allows a bit of relief from the expensive sting of tuition, fees and miscellaneous expenses. You may use education expenses to adjust your gross taxable income, with some limits and conditions. Under certain circumstances, this includes the cost of your online connection. In the meantime, any business use of the Internet may also bring a tax deduction.
Basic Deduction Rules
The IRS rules on education deductions say you can deduct up to $4,000 of tuition, fees and related expenses that you pay for yourself, a spouse or a dependent. The costs must be for post-secondary education, and any fees must be a condition of enrollment. This means that if the school requires the fee (or books, supplies and equipment) for you to enroll, you can itemize it as an adjustment to your income.
You may not itemize education expenses if you are filing a return as "married, separate" or if you are a nonresident alien for any part of the tax year. Nor is the deduction available if you can be claimed as a dependent on someone else's tax return. This would leave out many students who live at home, or who benefit from the support of parents who provide at least half of their expenses. For the purposes of this deduction, the IRS also limits your modified adjusted gross income to $80,000 when filing single, $160,000 when filing a joint return. If your AGI exceeds this amount, you can't deduct educational expenses.
Adjustment to Income
You take this useful tax break as an adjustment to income on Form 1040. This means you don't need to list it as an itemized deduction on Schedule A, and that you can still use it to reduce taxable income, even if you take the standard deduction. Although you don't need to document the expense with your return, you should always keep records and receipts that prove you paid deductible costs during the tax year.
Personal and Business Expenses
If you pay for the Internet yourself, and not as a condition of enrollment, then you are incurring a personal expense that is not deductible from income. However, if you concurrently use the Internet in a business (such as online sales or self-employment work as an independent contractor), then the cost would be a deductible business expense you can deduct on Schedule C (as long as you don't deduct it elsewhere). You can only deduct that portion related to business use. To do so, you must figure out what percentage of the time you actually use the Internet to generate taxable income, and deduct that same percentage of your annual expenses.
Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.