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Publication 970
Tax Benefits for Education

For use in preparing 2002 Returns

How Is the Deduction Figured?

The maximum deduction you can claim in 2002 is $3,000. However, the amount of your modified adjusted gross income (MAGI) determines whether the deduction is allowed. See Does the Amount of Your Income Affect the Amount of Your Deduction, next.

Does the Amount of Your Income Affect the Amount of Your Deduction?

If your MAGI is more than $65,000 ($130,000 if you file a joint return), you cannot claim a deduction for qualified tuition and related expenses.

Modified adjusted gross income (MAGI).   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.

MAGI when using Form 1040A.   If you file Form 1040A, your MAGI is the AGI on line 22 of that form, figured without taking into account any amount on line 19 (Tuition and fees deduction).

MAGI when using Form 1040.   If you file Form 1040, your MAGI is the AGI on line 36 of that form, figured without taking into account any amount on line 26 (Tuition and fees deduction) and modified by adding back any:

  1. Foreign earned income exclusion,
  2. Foreign housing exclusion,
  3. Foreign housing deduction,
  4. Exclusion of income for bona fide residents of American Samoa, and
  5. Exclusion of income from Puerto Rico.

You can use Worksheet 4-1 to figure your MAGI.

Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Before using this worksheet, you must complete Form 1040, lines 7 through 25 and lines 27 through 33a and figure any amount to be entered on the dotted line next to line 34.

Worksheet 4-1.  MAGI for the Tuition and Fees Deduction       (Keep for your records)
 1. Enter the amount from Form 1040, line 22  1.            
 2. Enter the total from Form 1040, lines 23 through 25 2.                 
 3. Enter the total from Form 1040, lines 27 through 33a, plus any amount entered on the dotted line next to line 34 3.                 
 4. Add the amounts on lines 2 and 3  4.            
 5. Subtract the amount on line 4 from the amount on line 1  5.            
 6. Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 43, or Form 2555-EZ, line 18)  6.            
 7. Enter your foreign housing deduction (Form 2555, line 48)  7.            
 8. Enter the amount of income from Puerto Rico you are excluding  8.            
 9. Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)  9.            
10. Add the amounts on lines 5 through 9. This is your modified adjusted gross income 10.       
     Note. If the amount on line 10 is more than $65,000 ($130,000 if married filing jointly), you cannot take the deduction for tuition and fees.

How Is the Deduction Claimed?

You deduct qualified tuition and fees by entering the amount you have figured on Form 1040, line 26, or Form 1040A, line 19.

An eligible educational institution (such as a college or university) that received payment of qualified tuition and related expenses in 2002 generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31, 2003. The information on Form 1098-T will help you determine whether you can claim a deduction for 2002. The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Social Security Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number.

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