Higher Education Tax Incentives

What is the difference between tax credits and tax deductions?

Tax credits decrease your tax liability, which is the amount of tax you owe. Tax deductions decrease your taxable income, which is the amount of your income that is subject to taxation.

What kinds of tax credits are available for higher education?

NOTE: Taxpayers may only take one of these two credits in a given year.

What is the American Opportunity Credit?

The American Opportunity Credit is a credit for up to $2,500 for the first $4,500 spent on qualified education expenses in a year and is available for the first four years of post-secondary education. Even if you do not make enough money to file a tax return, file anyway because you may get up to $1,000 back. Qualified education expenses include tuition and many other education-related expenses including required course material. The student must be enrolled at least half-time working toward an undergraduate degree during this time.

What is the Lifetime Learning Credit?

The Lifetime Learning Credit is a credit of up to $2,000 for the first $10,000 spent on qualified education expenses each year. Qualified education expenses include tuition and many other education-related expenses. The Lifetime Learning Credit is available for all years of post-secondary education. The student must be enrolled in at least one course at any qualified educational institution.

What kinds of tax deductions are available for higher education?

What is the Tuition and Fees Deduction?

The Tuition and Fees Deduction is a deduction of up to $4,000 for qualified tuition and fees paid during the year. This deduction is not available if anyone claims the American Opportunity Credit or the Lifetime Learning Credit for the same student

What is the Student Loan Interest Deduction?

The Student Loan Interest Deduction is a deduction of up to $2,500 for student loan interest paid during the year. This deduction is available in addition to the other deductions and credits.

Additional Information

You can find additional information about Tax Benefits for Higher Education on the IRS website.  IRS Publication 970 Tax Benefits for Education also contains additional information about higher education tax incentives, including the Coverdell Education Savings Account and Qualified Tuition Program.

Tax laws change frequently. The information contained on this page is current law as of January 5, 2017. Please contact your tax advisor or preparer for information about your specific tax situation.


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