Higher Education Tax Credits

Taxpayers who pay higher education costs for themselves, their spouse, or dependents may be able to take advantage of certain education tax credits and incentives. 

What you need to know...

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.

  • The American Opportunity Credit
    • A credit for up to $2,500 for the first $4,000 spent on qualified education expenses in a year. This credit 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 such as required course materials. 
    • The student must be enrolled at least half-time and working toward an undergraduate degree during taxable period to be eligible. 
  • The Lifetime Learning Credit
    • 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 during the taxable period to be eligible.

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

  • The Tuition and Fees Deduction
    • The deduction for tuition and fees expired on December 31, 2020. However, taxpayers who paid qualified tuition and fees in 2020 could claim a maximum deduction of $4,000. 
    • If you have questions about amending your 2020 tax returns to claim this deduction, please contact our office. This deduction is not available to filers who claimed the American Opportunity Credit or the Lifetime Learning credit for the same student. 
  • 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. 

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.  Please contact your tax advisor or preparer for information about your specific tax situation.