Taxpayers can take a tuition and fees deduction on Iowa tax returns — but only if they took the tuition and fees deduction on their federal return. If you take the American Opportunity Credit or the Lifetime Learning Credit on your federal return instead of the tuition and fees deduction, you can’t take the tuition and fees deduction on your Iowa return.
Here’s what the Iowa Department of Revenue said in a news release last week:
Please remember the tuition and fees deduction can only be taken on the Iowa return if the same deduction was taken for federal tax purposes. If the federal Lifetime Learning or American Opportunity credits were taken in lieu of the deduction, no deduction is allowed on the IA1040. This is true even though those credits are not allowed for Iowa purposes.
For some taxpayers, this may mean looking closely at the interplay between the tax benefit from the credits vs. the total tax savings (federal and state combined) of the tuition and fees deduction.