post secondary education tax deduction

Educational Tax Credits and Deductions You Can Claim for Tax Year 2023

Several tax breaks can help you cover the high costs of education, future college expenses and interest you pay on student loans.

Tax Breaks for Education

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If you're going to grad school or taking any continuing education classes – even if you aren't working toward a degree – you may be eligible for the lifetime learning credit.

Key Takeaways

The American opportunity credit can reduce your tax liability by up to $2,500 if you’re paying college tuition and fees.
Continuing education, part-time classes and graduate school costs can be eligible for the lifetime learning credit, which can lower your tax bill by up to $2,000.
Now that student loan payments have resumed, the tax break for student loan interest is even more attractive.
You can withdraw money tax-free from a 529 college-savings plan for a wide range of education expenses, and a new rule lets you roll unused money over to a Roth IRA.

College is expensive, but there are several valuable tax breaks that can help ease the pain.

You may be able to cut your tax bill by up to $2,500 if you're paying college tuition, and you may even be eligible for tax credits that can help cover the cost of continuing education classes to improve your job skills.

Interest you pay on student loans might also be tax deductible – which is especially timely now that payments have resumed. You can use tax-advantaged savings accounts to pay for college costs, and new rules let you roll over unused money in a 529 college-savings plan into a Roth IRA.

Here's how families can make the most of these tax breaks to stretch their savings :

American Opportunity Credit for College Costs

The American opportunity credit can cut your tax liability by up to $2,500 if you're paying for the first four years of higher education for yourself, your spouse or a dependent you claim on your tax return.

To qualify for this credit, the student must be enrolled at least half time and be pursuing a degree or other recognized educational credential at a college, university, vocational school or other eligible postsecondary educational institution.

To claim the full credit, your modified adjusted gross income, or MAGI, must be $80,000 or less if you're filing as single or head of household – or $160,000 or less for married couples filing jointly .

You can claim a partial credit if your MAGI is more than $80,000 but less than $90,000 if you're filing as single or head of household – or more than $160,000 but less than $180,000 if you're married and filing jointly. The credit is calculated as 100% of the first $2,000 of qualifying expenses, plus 25% of the next $2,000 – making the maximum credit $2,500 per student.

Eligible expenses include tuition and fees, plus books, supplies and equipment.

"The expenses must be paid during the tax year for you to qualify for the tax credit, but you can pay for expenses in 2023 for an academic period that begins during the first three months of 2024,” says financial aid expert Mark Kantrowitz, author of “How to Appeal for More College Financial Aid.”

You'll usually receive Form 1098-T from the college reporting the qualified expenses you paid. To claim the credit, use IRS Form 8863 . For more information, see IRS Publication 970 Tax Benefits for Education .

Lifetime Learning Credit for Grad School and Continuing Education

If you're going to grad school or taking any continuing education classes – even if you aren't working toward a degree – you may be eligible for the lifetime learning credit. It's worth 20% of up to $10,000 in eligible expenses, with a maximum credit of $2,000 per tax return.

"Having multiple individuals in college does not get you additional credits," says Tracie Miller, a CPA and professor at Franklin University. Eligible expenses include tuition and required fees for yourself, your spouse or a dependent you claim on your tax return.

The income limits are the same as they are for the American opportunity credit – to claim the full credit for tax year 2023, your MAGI must be $80,000 or less if you're filing as single or head of household, or $160,000 or less for joint filers. You can claim a partial credit if your MAGI is between $80,000 and $90,000 as a single or head of household filer – or $160,000 to $180,000 as a married person filing jointly.

There's no limit to the number of years you can claim the lifetime learning credit, and its education requirements are much broader than the American opportunity credit.

You can take the lifetime learning credit for graduate or undergraduate expenses, and you don't have to be enrolled at least half time or working toward a degree. You can also claim the credit for continuing education, certificate programs or separate classes you take to acquire or improve job skills, and it's available for an unlimited number of tax years.

The key is that the class must be offered by an eligible educational institution, including any college, university, vocational school or other postsecondary educational institution eligible to participate in a U.S. Department of Education student aid program.

This credit can also be valuable for people who lost their jobs and took classes to improve their job prospects.

"Courses to acquire new skills may be especially relevant right now," says Melody Thornton, a CPA and tax manager at Fitzgerald and Company in San Diego.

You should receive Form 1098-T from the eligible institution reporting the qualified expenses you paid. To claim the credit, complete IRS Form 8863.

Deduction for Student Loan Interest

If you're paying back student loans, you may be able to deduct up to $2,500 in interest. Payments restarted on federal student loans, and interest began accruing, on September 1, 2023. Many borrowers who didn’t pay any student loan interest during the pandemic will be able to start claiming this tax break again, Kantrowitz says.

“The student loan interest deduction allows a deduction for interest you pay on certain student loans for you, your spouse or a dependent. The interest deduction goes to the person legally obligated to pay the interest," says Timothy M. Todd, a law professor at Liberty University School of Law in Lynchburg, Virginia.

"So, if a parent takes out the loan for his or her dependent child and the parent makes the interest payments, the parent gets the deduction. However, if a student takes out the loan and the parent pays the interest, it is treated as though the parent transferred the money to the student who then makes the payment,” he adds.

The student can't get the break, however, if their parents claim them as a dependent.

To qualify for the deduction in 2023, your MAGI must be less than $90,000 if you're filing as single or head of household – or $185,000 if you're married and filing jointly. The size of the deduction starts to phase out if your MAGI is more than $75,000 if single or head of household – or $155,000 for married, fjoint filers.

There is a $2,500 cap on the deduction per return, which means that a married couple gets a maximum deduction of $2,500 even though they could each deduct up to $2,500 if they were single, Todd says. You don't have to itemize to claim the student loan interest deduction.

Maximizing 529 Tax Breaks for Education at All Ages

You can withdraw money tax-free from a 529 savings plan for college tuition, fees and equipment such as a computer or printer. You can also withdraw money tax-free for room and board if you're enrolled at least half time, even if you don't live on campus.

Eligible expenses for off-campus housing are generally limited to room and board costs that the college reports for financial aid purposes (look for the number on your financial aid reward page or ask the aid office).

"For example, if the room and board cost reported by the school is $15,000 but it costs $30,000 for the student living off campus, then only $15,000 is a valid 529 expense," Thornton says.

You can also withdraw money tax-free for a computer, whether you attend school on campus or virtually. Computer-program costs are also eligible expenses.

"As long as the student is using it for 529-related coursework, then you can use the 529 for those expenses," says Mary Morris, CEO of Virginia529.

There's no age limit for using the money, and you don't need to be working toward a degree.

"One of the really important things we see are adults going back to school – maybe they lost their job and are taking classes or a certificate program that puts them on a road to a new career," Morris says.

You can withdraw money tax-free from a 529 for those expenses as long as you're taking the classes from an eligible educational institution. You'll get the biggest tax benefits if you can keep the money growing for years in the tax-advantaged account.

It's Not Too Late to Start a 529 Plan

If you don't already have a 529, it might still be worthwhile to open one and make the most of any tax breaks you get for contributions, even if you plan to use the money soon for education expenses.

“For parents thinking of starting a 529 plan, it’s important to realize that although many states offer a state income tax break for contributions to such plans, states typically require that the contributions be made to the 529 plan sponsored by that state,” Todd says.

Visit the Saving For College website for details about each state's plans and tax rules, and the College Savings Plans Network website for information and links to each state program’s website.

You can also withdraw up to $10,000 per year, per beneficiary, from a 529 to pay tuition for kindergarten through 12th grade and avoid paying taxes.

If your child doesn't use the money for educational expenses, you can switch the beneficiary to another eligible family member. If you take withdrawals that aren't for eligible education expenses, the earnings are taxable and subject to a 10% penalty, although the penalty is waived in some circumstances.

"If a child receives a scholarship, a distribution for up to the amount of the scholarship can be made without being subject to the 10% penalty," Miller says. "The taxpayer must, though, still pay tax on the earnings of this distribution."

Even if your child qualifies for a scholarship, you may still have other eligible expenses that qualify for tax-free withdrawals, such as room and board, fees, books and equipment.

New 529 Options in 2024

The Secure 2.0 tax law expanded the options for unused 529 money. Starting in 2024, families saving for education in 529 plans can roll over unused funds from those accounts into Roth IRAs without tax penalties. The 529 plan beneficiary must own the Roth but you can change the beneficiary, Kantrowitz says.

You can roll over only up to the annual Roth IRA contribution limit each year – $7,000 for people under age 50 in 2024 – with a $35,000 lifetime limit per beneficiary. The 529 plan must have been in existence for at least 15 years, and only funds that have been in it for at least five years are eligible for a rollover, he says.

“Financial professionals agree that although there are limitations to the rollovers, it will provide a new option for individuals who find themselves with leftover or unused money in their 529 account but who don’t want to incur the tax penalties that come with taking a nonqualified withdrawal,” Morris says.

Coordinating Tax Credits for Education With Tax-Free 529 Withdrawals

You can qualify for the American opportunity credit or lifetime learning credit and take tax-free 529 withdrawals in the same year, but you need to be careful.

"To optimize the tax benefits, you can’t use 529 distributions for the same expenses,” Todd says.

"In short, you can't 'double dip.' If you end up taking out more from the 529 plan than qualified education expenses (after accounting for the expenses used for an education credit), part of the 529 distribution may be taxable,” he says.

For example, if you claim the full American opportunity credit, the $4,000 in tuition and fees you claim is not considered a qualified education expense for your 529, and part of the distribution may be taxable.

If you claim the full lifetime learning credit, you can't take tax-free 529 withdrawals for the first $10,000 in tuition expenses you claimed for the credit but you can withdraw money tax-free from the 529 for additional expenses.

"If you withdraw money from the 529 plan and are possibly eligible to claim a credit, make sure to keep receipts for all costs so that they maximize the benefits between the 529 and the credit," Thornton says.

Answers to 15 Common Tax Questions

Kimberly Lankford April 20, 2023

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Tags: money , personal finance , taxes , tax deductions , income tax , education

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Published: January 4, 2022 | Last Updated: October 24, 2023

Education tax credits and deductions.

Did you know there can be tax benefits for p u rs u ing higher ed ucation and/or specialized job training ? Certain tax credits, deductions, and savings plans can help with the cost of higher education expenses. Read below to see which option could work for you and the students in your life .

What do I need to know?

Just like the start of most learning plans, let’s start off with a few key terms to help you understand which tax benefits are available . The IRS Information Center for tax benefits for education provides the following definitions :

Credit – reduces the amount of income tax you have to pay.
Deduction – reduces the amount of your income that is taxed, which generally reduces the amount of tax you have to pay.
Savings Plans – certain savings plans allow you to grow savings tax-free until the money is taken out ( distribution ), or allow the distribution to ne tax-free, or both.

Typically , education-related tax breaks fall into one of these three categories: tax credits, tax deductions, or savings plans. This page will provide information specific to certain credits and deductions.

Education Credits

An education credit helps with the cost of higher education by reducing the amount of tax you owe on your return.

The  American Opportunity Tax Credit (AOTC)  is a partially-refundable tax credit for college education where the student must attend at least half-time. The credit is available for the first four years of college education.
The  Lifetime Learning Credit  is a non-refundable tax credit of up to $2,000 per tax return, where you can claim qualifying expenses for any level of college or education courses to advance or improve job skills. There is no minimum enrollment requirement or limit on the number of years you can claim the credit.

“Refundable” means the credit is like a payment on your return. For the A OTC, If that that the credit amount is more than you owe, you may get a refund of up to $1,000. “Non-refundable” means the credit will only reduce your tax. Even if the credit is more than you owe, you won’t get a refund.

You can claim both the American Opportunity Tax Credit and the Lifetime Learning Credit on the same tax return, but not for the same student.

Keep records of qualifying expenses you've paid

The student should receive an IRS  Form 1098-T , Tuition Statement, from the educational institution. If the student doesn’t receive the form, the student should request one from the institution. The credit can’t be claimed without an IRS Form 1098-T, Tuition Statement, unless the educational institution is not required to furnish the form under existing rules.
Be sure to keep records that show the student was enrolled and the amount of paid qualified tuition and related expenses. You may need to send copies of those records if the IRS contacts you regarding your claim of the credit.

Be aware of common mistakes

The student is listed as a dependent on another tax return.
The student doesn’t have an IRS Form 1098-T showing he or she attended an eligible institution.
Claiming non-qualifying education expenses (such as room and board, transportation, or other family/living expenses).
Claiming the credit for a student not attending a college or other higher education institution.
Trying to claim both credits for the same student.
Filing a timely tax return and the student doesn’t have a valid SSN, ITIN, or an ATIN at that time.

Caution :  The amount on Form 1098-T may not be the amount of expenses you can claim. Descriptions of which expenses qualify are available in IRS  Publication 970 , Tax Benefits for Education.

What should I do?

Compare the educational credits to see which fits your situation best

Each credit has different requirements and benefits. You can compare education credits on the IRS’s comparison chart .

Determine your eligibility

You may be eligible to claim an education credit if:

You, your spouse, or a dependent on your tax return is the student.
Qualified education expenses are tuition, fees, and other related expenses required for enrollment or attendance at an eligible educational institution. Nonacademic fees (like student activity fees or athletic fees) are qualified only if the fee must be paid to the institution as a condition of enrollment or attendance. Personal expenses (like room and board) are never qualified education expenses.
This means any college, university, vocational school, or other post-secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education. If you’re not sure your school is eligible, ask the financial aid office.
Your modified adjusted gross income (MAGI) falls under the limit for the credit (see the IRS’s comparison chart for details).
For the American Opportunity Tax Credit , the student must also be pursuing a degree or other recognized education credential, and must be enrolled at least half-time for at least one academic period beginning during the tax year (or the first three months of the next tax year if the expenses were paid in the tax year).
For the Lifetime Learning Credit, the student can be pursuing any course of instruction at an eligible educational institution to acquire or improve job skills. There is no requirement to be enrolled at least half-time. The student can take one or more courses at the qualified institution.

You’re NOT eligible if:

Someone else, such as your parents, lists you as a dependent on their tax return.
Your filing status is married filing separately.
You already claimed or deducted another higher education benefit using the same student or same expenses.
You (or your spouse) were a non-resident alien for any part of the year and didn’t choose to be treated as a resident alien for tax purposes.
The student has a felony drug conviction (applies only to a claim for the American Opportunity Tax Credit).
You, (or your spouse if filing a joint return), and the qualifying student didn’t have a valid taxpayer identification number (Social Security Number (SSN), or Individual Taxpayer Identification Number (ITIN), or Adoption Taxpayer Identification Number (ATIN)) issued or applied for on or before the due date of your return (including extensions).

How will this affect me?

You can only claim one education credit for any student and their expense. If you or your dependent qualifies for both credits, you may want to figure which deduction would give you the best benefit.

If you receive tax-free educational assistance, such as a grant, you need to subtract that amount from your qualified education expenses.

The PATH Act prevents you from filing past due returns or amended returns claiming the American Opportunity Tax Credit (AOTC) if the reason you’re filing is because you now have the type of valid Taxpayer Identification Number (TIN) required for each credit but such TIN wasn’t issued on or before the due date of the return (including a valid extension).

If for any reason you or one of your family members didn’t receive a valid “taxpayer identification number” on or before the due date of the tax return (including extensions) you can’t file a past due return or an amended return to claim any of these credits. A valid taxpayer identification number could be a SSN, ITIN, or ATIN depending on the requirement for each credit.

For tax years beginning after June 29, 2015, generally 2016 tax year returns, you must have received an IRS Form 1098-T from an eligible educational institution to claim the American Opportunity Tax Credit or Lifetime Learning Credit.

Wait, I still need help.

The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayers’ rights. We can offer you help if your tax problem is causing a financial difficulty, you’ve tried and been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure just isn’t working as it should. If you qualify for our assistance, which is always free, we will do everything possible to help you.

Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.

Low Income Taxpayer Clinics (LITCs) are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, see the LITC page on the TAS website or Publication 4134 , Low Income Taxpayer Clinic List.

There are several education-related tax deductions that could also provide tax benefits.

Student Loan Interest Deduction

Depending on your income, you can take a special deduction for the interest you paid during the year on qualified student loans. The deduction can reduce your taxable income by up to $2,500 and can be claimed even if you do not itemize deductions on your tax return.

See IRS Publication 970 , Tax Benefits for Education, for income thresholds and other requirements.

Work-related Education Business Deduction

This deduction may benefit workers (including those who are self-employed) who itemize their deductions and paid for work-related education.

Claiming this deduction may reduce the amount of income you earn that is subject to tax. There are certain requirements you must meet to claim this deduction, and it cannot be claimed in addition to other education credits for the same expense.

Visit the IRS’s Information Center for tax benefits for education to learn about all the requirements.

MISCELLANEOUS: Educator Expense Deduction

The Educator Expense Deduction is not applicable to students or their parents pursuing higher education but is an important education-related tax benefit. Essentially, this deduction allows educators the opportunity to to deduct up to a certain amount for unreimbursed business expenses like books, supplies, computer equipment, classroom equipment and other materials used in the classroom.

The educator does not need to itemize deductions to take this credit. Read the IRS Tax Topic on Educator Expense Deduction for more details about how educators can qualify for this deduction.

Resources and Guidance

Publication 970,

Tax benefits for education.

Internal Revenue Manual (IRM)

Irm 21.6.3, credits (subsections 4.1.5, 4.1.5.1, and 4.2.11).

Education Benefits – – No Double Benefits Allowed

Treasury Regulation §1.25A-1

Calculation of education tax credit and general eligibility requirements.

Questions and Answers

American Opportunity and Lifetime Learning credits

Eligibility Tool

“am i eligible to claim an education credit”.

Did you know there is a Taxpayer Bill of Rights?

The taxpayer Bill of Rights is grouped into 10 easy to understand categories outlining the taxpayer rights and protections embedded in the tax code.

It is also what guides the advocacy work we do for taxpayers.

Compare Education Credits

There are several differences and some similarities between the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). You can claim these two benefits on the same return but not for the same student or the same qualified expenses. See " No Double Benefits Allowed " for more information on claiming one or more education benefits.

Tax Year 2023 Education Benefits Comparison

ˆ Third Party -Qualified education expenses paid by a third party for you or a student you claimed as a dependent on your return are considered paid by you for the AOTC and LLC. Payments by third parties include amounts paid by relatives or friends.

* MAGI , modified adjusted gross income: For most people, MAGI is the amount of AGI, adjusted gross income, shown on your tax return. If you file Form 1040 or Form 1040SR, AGI is on line 8b and you add back the following:

Foreign earned income exclusion,
Foreign housing exclusion,
Foreign housing deduction,
Exclusion of income by bona fide residents of American Samoa, and
Exclusion of income by bona fide residents of Puerto Rico.

If you need to adjust your AGI to find your MAGI, there are worksheets in the Publication 970 PDF to help you.

Education Benefits Resources

Education Credits
What You Need to Know about AOTC and LLC
Education Credit Products
Tax Benefits for Education: Information Center
Publication 970, Tax Benefits for Education PDF
Department of Education website

Return to Refundable Credit Toolkit

Page 6 of 11

Differences Between the Two Credits

The amount of the American Opportunity Credit is gradually reduced as taxpayers' income increases.

There is no limit on the number of years the Lifetime Learning Credit can be claimed.

The differences between the two credits are summarized in this chart.

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American Opportunity Tax Credit and Other Education Tax Credits for 2023

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The American Opportunity Tax Credit and the Lifetime Learning Credit are federal tax credits that can lower your upcoming tax bill if you paid for college in 2023.

You can claim these education tax credits as a student if you're not claimed as a dependent on anyone else's tax return. Parents can claim the credit for a student who is a dependent. Spouses can claim the credit if they use the married filing jointly status .

Here's what you need to know about the American Opportunity Tax Credit, Lifetime Learning Credit and education tax forms.

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What is the American Opportunity Tax Credit?

The American Opportunity Tax Credit is a federal tax credit that allows you to lower your tax bill by up to $2,500 if you paid that much in undergraduate education expenses last year.

How the American Opportunity Tax Credit works

The American Opportunity Tax Credit lets you claim all of the first $2,000 you spend on eligible education expenses, plus 25% of the next $2,000, for a total of $2,500. Qualified expenses include:

Mandatory school fees.

Books and supplies.

You may not claim living expenses or transportation costs.

Who can claim the American Opportunity Tax Credit?

The American Opportunity Tax Credit is for undergraduate college students only. To qualify, students must meet the following criteria, according to the IRS:

Be pursuing a degree or other recognized education credential.

Be enrolled at least half time for at least one academic period beginning in the tax year.

Not have finished the first four years of higher education at the beginning of the tax year.

Not have claimed the American Opportunity Tax Credit for more than four tax years.

Not have a felony drug conviction at the end of the tax year.

As a student, you can claim the credit on your taxes for a maximum of four years as long as no one else, like your parents, claims you as a dependent on their tax returns. Parents will claim the credit, instead of the student, if they paid for the student's education expenses and have the student listed as a dependent on their return.

Your 2023 modified adjusted gross income, or MAGI, determines how much of the American Opportunity Tax Credit you can claim:

What the American Opportunity Credit is worth

The American Opportunity Tax Credit lowers the amount of taxes you pay. For example, if you owe $3,000 in taxes and get the full $2,500 credit, you’ll only have to pay $500 to the IRS.

Is the American Opportunity Tax Credit refundable?

Yes, it's refundable. You can still receive 40% of the American Opportunity Tax Credit's value — up to $1,000 — even if you earned no income last year or owe no tax. For example, if you qualified for a refund, this credit could increase the amount you'd receive by up to $1,000. That's why the American Opportunity Tax Credit is typically the best education tax break for students and their families.

» MORE: Guide to filing taxes with student loans

What is the Lifetime Learning Credit?

The Lifetime Learning Credit is a a federal tax credit that can reduce your taxable income by up to $2,000 if you're pursuing an undergraduate, graduate, vocational or non-degree program. Unlike the American Opportunity Tax Credit, there's no limit to the number of tax years in which you can claim this credit.

How the Lifetime Learning Credit works

You can claim 20% of the first $10,000 you paid toward 2023 tuition and fees, for a maximum of $2,000 each year.

Course supplies, living expenses and transportation costs are not qualified expenses for the Lifetime Learning Credit.

Who can claim the Lifetime Learning Credit?

The Lifetime Learning Credit is ideal for graduate students or anyone taking classes to develop new skills, even if you already claimed the American Opportunity Tax Credit on your taxes in the past.

Students can claim the Lifetime Learning Credit for themselves if they file their own taxes. Parents of dependent students can also claim the credit.

To qualify for the Lifetime Learning Credit, you must meet the following criteria, according to the IRS:

Be enrolled or taking courses at an eligible educational institution.

Be taking higher education courses to get a degree or other recognized education credential or to get or improve job skills.

Be enrolled for at least one academic period beginning in the tax year.

Your 2023 modified adjusted gross income, or MAGI, determines how much of the Lifetime Learning Credit you can claim:

Is the Lifetime Learning Credit refundable?

No, the Lifetime Learning Credit is not refundable. You can use the credit to pay any tax you owe, but you won't receive the money back as a refund, even if you earned no income or owe no tax.

» MORE: The difference between tax credits and tax deductions

American Opportunity Tax Credit vs. Lifetime Learning Credit

The American Tax Opportunity Credit is generally more valuable that the Lifetime Learning Credit, if you qualify. You can't claim both the American Opportunity Tax Credit and the Lifetime Learning Credit for the same student or the same qualified expenses.

Here are the key differences between these two education tax credits:

Education tax forms

In January your school will send you Form 1098-T, a tuition statement that shows the education expenses you paid for the year. You’ll use that form to enter the corresponding amounts on your tax return to claim an education tax credit or deduction.

If you also paid student loans , you may be able to deduct student loan interest from your taxable income. If you paid more than $600 in interest, your servicer will automatically send you Form 1098-E. You can still deduct interest if you paid less than $600, but you’ll have to ask your servicer for the form.

If your company provided funds for educational assistance — like tuition reimbursement or employer student loan repayment — up to $5,250 can be excluded from your taxable income.

On a similar note...

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Tax Credits For Higher Education

If you have post-secondary school education expenses, you might be eligible for two credits.

American Opportunity Credit

You might be able to claim an American Opportunity Credit of up to $2,500 for 2023. You can apply this to qualified education expenses paid for each eligible student. The credit is calculated in two parts and is equal to:

100% of the first $2,000 of eligible expenses
25% of the next $2,000 in eligible expenses

This is a per-student limit. You can only claim it for the first four years of higher education. This credit is 40% refundable for most taxpayers.

Lifetime Learning Credit

You might be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses. You can claim this credit only once per return. However, there’s no limit on the number of years you can claim the credit.

For the Lifetime Learning Credit, you can claim a maximum of $10,000 in total expenses for all eligible students. The credit is equal to 20% of the expenses. So, the maximum credit allowed is $2,000 (20% of $10,000). If you have fewer expenses, your credit will be lower.

Credit eligibility

To qualify for the American Opportunity Credit or the Lifetime Learning Credit, you must meet all of these requirements:

Eligible educational institution

Eligible expenses

Eligible student

An eligible institution for both credits:

Is a post-secondary institution
Can participate in a student financial aid program from the U.S. Department of Education

Institutions include:

Universities
Post-secondary vocational schools
Other post-secondary educational institutions

These expenses for the Lifetime Learning Credit include:

During the year
Within three months after the close of the year

Expenses for the American Opportunity Credit include tuition and fees required for the course or program. This is for courses or programs you take:

Books, supplies, and equipment needed for a course of study. It doesn’t matter if you bought these materials from the school as a condition of enrollment or attendance.

Ineligible expenses for the education credits include:

Incidentals
Transportation
Medical expenses
Noncredit courses

Eligible students

Each credit has a different definition of an eligible student. Eligible students for the American Opportunity Credit must meet these requirements:

Carry at least half the normal full-time workload for the student’s course of study in at least one academic period during the year
Certificate
Other recognized educational credential
Not have expenses used for an American Opportunity Credit in any four earlier tax years. This includes a tax year when you claimed the Hope Credit for the same student.
Not have completed the first four years of higher education as determined by the institution
Not have been convicted of a felony offense for possessing or distributing a controlled substance
Not have an adjusted gross income (AGI) that’s more than the phase-out limits — $80,000 if filing as single or $160,000 if married filing jointly. The credit is completely phased out for AGIs of $90,000 if single and $180,000 if married filing jointly

Eligibility for the Lifetime Learning Credit isn’t based on a student’s workload. A student who takes one or more courses is eligible. The credit also isn’t limited to a student’s first four years.

Qualified expenses for the Lifetime Learning Credit also include the cost of courses that aren’t part of a degree or certificate program. So, working adults who take occasional courses to strengthen their job skills are eligible to claim this credit.

Other requirements

These are other requirements for the credits:

You can’t claim both the American Opportunity Credit and the Lifetime Learning Credit for the same student.
You’re married.
You and your spouse file separate returns.

Both credits are phased out as your income climbs:

If you’re filing as single or head of household, the credit starts phasing out at $55,000 and is eliminated at $65,000.
If married filing jointly, the credit starts phasing out at $110,000 and is eliminated at $130,000.
If you’re filing as single or head of household, the credit starts phasing out at $80,000 and is eliminated at $90,000.
If married filing jointly, the credit starts phasing out at $160,000 and is eliminated at $180,000.

To learn more, see these at www.irs.gov:

Publication 970: Tax Benefits for Higher Education

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IRS Form 8917: Full Guide to Understanding Tuition and Fees Deduction

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Here’s a great reason to continue your education – The IRS will allow you to claim a deduction on your post-secondary tuition and fees! When you or your tax preparer files IRS form 8917, you can deduct a portion of your tuition and fees for all qualifying post-secondary education.

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IRS form 8917 with People Working on Computer

What is the IRS form 8917?

IRS Form 8917 allows you to take a tuition and fee deduction on a qualifying post-secondary course.

When you enroll into a post-secondary school course, the school will send you Form 1098-T. This form will allow you to file your tuition and fees deduction.

You will only be allowed to deduct the amount stated on the Form 1098-T.

Other educational costs such as books, equipment, room & board can not be deducted with IRS form 8917.

File with Ease from Home Today!

Example Scenario for Form 8917

Becky is a single 26 year old high school guidance counselor who is enrolled in the Masters Program for Psychology at the University of Georgia. Her in-state tuition and fees during the 2019 tax year was $11,357. Her additional costs for textbooks, room and board were $7,289. Becky received a Form 1098-T from the University of Georgia which indicated a tuition and fee cost of $11,357. Becky’s salary as a high school guidance counselor is $48,700. Her salary as a single tax filer is under the $80,000 adjusted gross income (AGI) single filer limit for IRS Form 8917 eligibility. Therefore, she will qualify for the Tuition and Fees Deduction. She will be able to file IRS Form 8917 and include $11,357 on the form for the 2019 tax year. Becky’s maximum deduction will be $4,000.

What to Know About this IRS Tax Form

Here are some frequently asked questions regarding IRS Form 8917.

How to fill out IRS form 8917 students in college studying

What is the tuition and fees deduction Form 8917?

The tuition and fees deduction Form 8917 is a form that allows you to deduct a portion of your qualifying post-secondary education during a given tax year.

How many courses do you need to attend to qualify for the deduction?

You only need to take one course during the tax year to qualify for the deduction. Even if you drop out, you can still qualify for the deduction if the school does not issue you a refund.

What is the difference between form 8863 and 8917?

Both IRS form 8863 and IRS form 8917 offer tax savings for education expenses and are often confused with each other.

Here is the main difference between form 8863 and form 8917:

Form 8873 gives you the Tuition and Fees Deduction
IRS Form 8917 offers you two different tax deductions – the Opportunity Tax Credit and the Lifetime Learning Credit.
Form 8873 is a tax deduction while Form 8917 is a tax credit. A deduction reduces your taxable income while a tax credit gives you a dollar for dollar reduction on your taxes.

What courses do not qualify for Form 8917?

The following courses will not qualify if taken at a post secondary school:

Courses or any other education involving games, sports or hobbies
Non-credit courses (Exceptions are non-credit courses that is part of a student’s degree program or a course that helps the student acquire a job or improve job skills)

Can I take the tuition and fees deduction?

You can take the tuition and fees deduction if you have taken at least one course from a qualifying post-secondary school in a tax year.

IRS form 8863 college library with books

Does Form 1098-T affect Form 8917?

Form 1098-T is the form that is issued by the school to show how much tuition and fees that you paid to the school during the tax year.

You will need to submit Form 1098-T in order to file Form 8917.

What is the deduction limited, per tax year. Form Form 8917?

The most that you can deduct during a tax year is $4,000 for tax year 2019. If you spend more than

$4,000, then that amount can not be deducted. Also, the excess cost can not be carried over to the next year.

What post-secondary schools qualify for Form 8917?

A qualifying school must be an educational program that is eligible for the Federal student financial aid program.

The qualifying school will typically require a high school or GED diploma before enrolling.

Can I make deductions for tuition that I prepaid for the next year?

Yes, you can take a deduction if you paid this year for a course that you will be taking the next year. However, the course will have to start before April 1 of the next year.

Is there an income limit to using IRS Form 8917?

Yes. If you are single and have an Adjusted Gross Income (AGI) of more than $80,000 or if you are married and have an AGI over $160,000 then you will not be able to qualify for the tuition and fees deduction.

Is there a residency requirement to file Form 8917?

There is no residency requirement to file Form 8917.

What information do I need to have to fill out IRS Form 8917?

IRS Form 8719 is a relatively short IRS form that is only half a page long. Here is the information that you will need to have in order to complete the form:

Student name
Student social security number
Adjusted qualified expenses (tuition & fees)
Your adjusted gross income

Who can not file Form 8917?

You can not file Form 8917 if:

Your filing status is married and filing separately.
Someone can claim you as a dependent.
Your AGI is over $80,000 as a single filer.
If your AGI is over $160,000 as a married filer.
You are a non-resident alien and you didn’t elect the non-resident alien tax status.

3 Easy Tips to Remember for Form 8917

Make sure that the course(s) that you are taking is eligible for the Form 8917 deduction.
Make sure that your AGI is below the limit to be eligible for the Form 8917 deduction.
Ask your school or university where you will receive Form 1098-T.

How to claim a tax deduction for college tuition with IRS form 8917 with woman in front of class

Getting your tuition and fee deduction this year

IRS Form 8917 allows you to claim a tax deduction for your post-secondary education expenses. Be sure to check if you qualify for the Tuition and Fees Deduction before you enroll.

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Nikida Metellus is a financial freedom advocate, author, and the reimagined voice behind ThemeParkHipster.com, now focused on helping you achieve a debt-free life and financial success. Based in Orlando, Florida, she combines her love for theme parks with actionable financial strategies, offering a unique perspective on balancing fun and finances. As the author of Complete Tax Planning Guide , she has now expanded her expertise to guide you on the road to financial freedom. Co-founder of Bramework and a coffee enthusiast at heart, Nikida is committed to empowering you with practical tips and insights to manage your money wisely. When she's not blogging or exploring Florida's attractions, she enjoys quality time with her husband and two daughters. Welcome to your journey toward a financially free life!

11 Education Tax Credits and Deductions

Education tax credits and deductions are available for college savings, current students, and college graduates.

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It's not always easy to determine which education tax credits and deductions you qualify for, and you might not know about all the tax breaks available. In fact, you probably have more options for saving on college costs than you think.

There are tax breaks for people saving for college, current students, and graduates who are paying off student loans .

Taking advantage of these tax breaks may help you keep more of your money.

Here's what you need to know about education tax credits and deductions before you file your 2023 income tax return this year.

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Education tax break: 529 plans

While investment income is generally taxable, income from investments in a 529 college savings plan is not. That means you won't need to pay federal taxes on the income you earn from your 529 plan (as long as you use it for qualified education expenses).

Some states also allow you to deduct your 529 plan contributions from your taxable income. That means you may not need to pay state income tax on the money you use to fund your 529 plan.

The rules for 529 savings plans don't always limit qualifying education expenses to college tuition or books. Parents and guardians may be able to use the savings to pay for other types of education. For example:

You may use up to $10,000 for private K-12 education
You may use your 529 savings plan to pay for trade school.
You may change the beneficiary of the 529 savings plan if needed (transfer the plan to another individual).

What if my child doesn't go to college? Starting in 2024, up to $35,000 (lifetime limit) can, under a provision in the SECURE 2.0 Act , be rolled over from a 529 plan to a Roth IRA. So, your child or grandchild might be able to eventually benefit from your 529 contributions, even if they don't use the funds for education. However, there are rules governing these 529-to-Roth rollovers, one of which is that you had to have to 529 plan for at least 15 years. There are also specific plan beneficiary requirements.

Overall, rules and benefits for 529 plans vary by state and are based on the 529 savings plan you choose, so it is always important to do your research to see which plan best aligns with your family’s needs.

Education tax break: Coverdell education savings accounts (ESAs)

Another way to save for college is through a Coverdell Education Savings Account (ESA). Like 529 plans, money deposited in a Coverdell ESA grows tax free, and there's no tax on distributions used for qualified college expenses. Additionally, you may choose your own investments with a Coverdell savings account. However, unlike 529 plans, the tax code places limits on who can contribute to a Coverdell ESA.

Single people can contribute to a Coverdell ESA only if they have a modified adjusted gross income (MAGI) of $110,000 or less.
Married couples filing a joint return can't have a modified AGI of more than $220,000.

(Modified AGI is equal to your federal AGI, plus any foreign earned income exclusion and/or housing exclusion, foreign housing deduction, and excluded income from Puerto Rico or American Samoa.)

There are other limits for Coverdell Education Savings Accounts.

The maximum contribution limit for 2023 is $2,000 per child.
You can only contribute to a Coverdell ESA until your child is 18 (unless your child has special needs).
Amounts still remaining in a Coverdell ESA must be distributed within 30 days after the beneficiary's 30th birthday (unless the beneficiary has special needs).

American opportunity tax credit

The American Opportunity tax credit (AOTC) is an education tax credit available to people who are currently enrolled in college courses. The credit is partially refundable, meaning it is possible to receive part of the total credit as a tax refund.

Eligible taxpayers (student, parent or spouse) can claim the credit for 100% of the first $2,000 spent on qualified education expenses (such as tuition, fees and textbooks).
Eligible taxpayers can claim 25% of the next $2,000.
The total credit is worth up to $2,500 for each qualifying student.
If the credit amount exceeds the tax you owe for the year, you'll get a refund for 40% of the remaining amount, up to $1,000, for each qualifying student.

Not every student can claim the credit. If any of the following apply, you are not eligible to claim the AOTC.

You are not in your first four years of college.
You are not enrolled in college courses at least half-time for at least one academic period in the tax year.
You are not pursuing a college degree or other qualified education credential.
You have had a felony drug conviction.
You are claimed as a dependent on another tax return.
You have already claimed the AOTC (or the former Hope credit) for four tax years.

(Note: If the IRS audits your return and determines you claimed the credit when you were not eligible, you could be banned from claiming the credit for up to 10 years. Additionally, the IRS could impose a penalty for fraud.)

You can only claim qualified expenses for the AOTC. These include tuition and certain related expenses required for enrollment or attendance at the student's college (for example, necessary fees, books, supplies, and equipment).

What expenses do not qualify? Amounts paid for insurance, medical expenses (including student health fees), room and board, transportation, and living or family expenses do not qualify.

The amount of the credit you can claim depends on your adjusted gross income (AGI). If you can't claim the full credit, you may be able to claim part of it.

Joint filers qualify for the full credit if their modified AGI is $160,000 or less
Single filers get the full amount with a modified AGI of $80,000 or less
The credit is gradually reduced to zero for married couples with a modified AGI between $160,000 and $180,000
The credit is gradually reduced to zero for single taxpayers with a modified AGI between $80,000 and $90,000

There are a number of rules that prevent duplicate tax benefits. You can't deduct education expenses you use to calculate the AOTC anywhere else on your tax return. For example, if you deduct textbook expenses as a business expense, the IRS says you can't use those book expenses to calculate the AOTC.

Lifetime learning tax credit

Another tax credit for people currently enrolled in college is the Lifetime Learning Credit (LLC). This credit is worth up to $2,000 per tax return. Unlike the American Opportunity tax credit, eligible graduate students can claim the credit. And students don't need to attend at least half-time to claim the credit, either.

This education credit can be claimed for an unlimited number of years. However, the Lifetime Learning credit is not refundable. This means it can lower your tax bill to zero, but you won't receive any portion of the credit as a tax refund.

Income guidelines for the Lifetime Learning Credit are the same as those for the American Opportunity Tax Credit (AOTC).

If you're married and filing a joint return, you can claim the full credit if you're modified AGI is $160,000 or less.
Single filers with a modified AGI of $80,000 or less can claim the full credit.
The credit is gradually reduced to zero for joint filers with a modified AGI between $160,000 and $180,000.
For single taxpayers, the credit is gradually reduced to zero when the modified AGI is between $80,000 and $90,000.

Like with the AOTC, education tuition and fees required for enrollment qualify as education expenses. But more people may qualify for the Lifetime Learning Credit since classes to improve job skills might qualify.

Note: Just like with the AOTC, the IRS says you cannot claim expenses you use to calculate the Lifetime Learning credit anywhere else on your tax return.

Tax breaks for scholarships and other assistance

A scholarship, fellowship, or grant may be excluded from taxable income if you're pursuing a degree at an eligible educational institution. Education assistance is only tax-free if the funds are used to pay for qualified education expenses.

What are Qualified Education Expenses?

Tuition or fees that are required for enrollment or attendance
Books, supplies, equipment or other expenses that are required by the learning institution for a class.

To be considered tax-free, scholarships can't exceed your education expenses or be used to pay for expenses such as room and board or travel.

What about VA education benefits? Payments to veterans for education under any law administered by the Department of Veterans Affairs are tax-free. However, if you qualify for other education tax benefits in addition to military benefits , you may have to reduce the amount of education expenses that you claim.

Qualified Tuition Reduction: If your tuition is reduced because you or a relative work for a college, you might not have to pay tax on the discount.

For graduate courses, only students who perform teaching or research activities for the educational institution can receive tax-free tuition reductions.

If you receive a tuition reduction for undergraduate courses, it's tax-free only if you meet one of the following criteria.

Are an employee of the college
Are a former employee of the college who retired or left on disability
Are a widow(er) of someone who died while employed by the college or who retired or left on disability
Are the dependent child or spouse of someone described above

Employer-provided educational assistance

While not an education tax credit, employer-provided education assistance can sometimes result in a tax break. Workers who receive educational assistance benefits from their employer can exclude up to $5,250 of those benefits from their taxable income each year.

Employee educational assistance benefits must be paid under a written educational assistance program.

However, payments for the following items are not considered tax-exempt as part of employee education assistance.

Meals, lodging or transportation
Tools or supplies (other than textbooks) that you can keep
Courses involving sports, games or hobbies (unless they have a reasonable relationship to the employer's business or are required as part of a degree program)

Employees generally have to pay tax on any educational assistance benefits over $5,250. However, benefits over the $5,250 limit are still tax-free if they qualify as a working condition fringe benefit. (A benefit that would be allowable as a business expense deduction if you had paid for it.)

If any portion of your employee education assistance is taxable, the amount will be listed in box 1 of your Form W2 .

As a reminder, the IRS says you cannot claim expenses paid with tax-free employee assistance anywhere else on your tax return.

Education tax deduction for the self-employed

There are a number of self-employment tax deductions . For example, self-employed people generally can deduct the cost of work-related education as a business expense. This reduces the amount of income subject to both the federal income tax and self-employment tax. To qualify as a business deduction, the education must meet meet one of the following conditions:

Be required to keep your present salary, status or job
Taken to maintain or improve skills needed in your present work

Even if your education meets the above qualifications, the IRS says you won't be able to claim education expenses as business deductions if any of the following apply:

The education is needed to meet the minimum qualifications of your trade or business
The education is part of a program that would qualify you for a new trade

Various types of expenses can qualify for education tax deductions if you are self-employed. These include (but are not limited to) the following:

Books and supplies
Some transportation expenses (for example, transportation costs to get to and from classes)

What expenses aren't deductible? You cannot deduct the dollar value of vacation time or annual leave taken to attend classes.

If you used funds from a tax-free scholarship, grant, or employer-provided educational assistance to cover the cost of education expenses, you cannot those costs as a business expense.

You also cannot deduct education expenses if you used the expenses to calculate another credit (like the AOTC or Lifetime Learning Credit).

Early distributions from IRAs

Individual retirement accounts (IRAs) are meant to be used in retirement. You generally have to pay a 10% tax if you take money out of an IRA before you reach age 59½ .

However, it's possible to withdraw funds from an IRA to pay for qualified higher education expenses without having to pay the 10% tax penalty.

For the 10% penalty tax to be waived, early distributions should be taken in the same year that expenses are paid. Additionally, education expenses must be for one of the following people:

Your spouse
Your or your spouse's child, foster child or adopted child
Your or your spouse's grandchild

Many types of education expenses qualify to avoid the 10% penalty. According to the IRS, you can use early distributions to pay for the following qualified education expenses:

Tuition and fees
Books, supplies, and equipment required for enrollment or attendance
Room and board for student's attending at least half-time
For students with special needs, expenses for any special services incurred in connection with the student's enrollment or attendance also qualify

Distributions that exceed the dollar amount of qualified education expenses are subject to the 10% penalty.

Note: You will still need to pay income tax on the amount withdrawn from IRAs, even if the distributions are used to pay for qualified education expenses.

Education savings bond program

You might be able to cash in savings bonds without paying tax on the interest earned. To avoid paying tax on interest earnings, you can use the earnings to pay qualified education expenses for yourself, your spouse, or a dependent.

The savings bonds must be series EE bonds issued after 1989 or series I bonds . The bonds must also be issued either in your name (as the sole owner) or in the name of you and your spouse (as co-owners). Additionally, the owner must be at least 24 years old before the bond's issue date.

If you want to avoid paying federal income tax on interest from these savings bonds, you must use the earnings to pay for qualified education expenses.

Qualified Education Expenses

Equipment and supplies (for example, a laptop)

Qualifying expenses must be paid to a school that is eligible to participate in federal student aid programs. The expenses should also be paid in the same year that savings bonds are redeemed.

You also need to have income that does not exceed the income threshold the IRS sets each year. You will claim your exclusion of interest from series EE and I savings bonds on Form 8815 .

Tax deduction for student loan interest

In some cases, you can take an education tax deduction for the interest you paid on your student loans. You can take this deduction whether or not you itemize. (Most people take the standard deduction .)

You can only deduct up to $2,500 of student loan interest paid each year. However, how much you can deduct depends on your modified AGI . That $2,500 is gradually reduced to zero for single filers with a modified AGI between $70,000 and $85,000. For joint filers, the amount is reduced with a modified AGI between $145,000 and $175,000.

To deduct student loan interest, you must have taken out the loan solely to pay qualified education expenses for you, your spouse, or a person who was your dependent at the time you took out the loan.

These items are typically considered by the IRS to be qualified education expenses:

Room and board
Books, supplies, and equipment
Other necessary expenses (such as transportation to and from classes)

Married couples filing separate returns cannot claim the student loan interest deduction . You're also disqualified if someone else (such as a parent or guardian) claims you as a dependent on their tax return.

Education tax breaks for student loan forgiveness

While federal student loan payments have resumed, some graduates might have student loans forgiven through other programs. So, it's good to know whether your forgiven student loan amounts are taxable or tax-free.

If you have had $600 or more of your student loans forgiven, the forgiven amount could be considered taxable income . However, discharged loan amounts resulting from certain student loan forgiveness and repayment assistance programs are tax-free.

You may not need to pay income tax on amounts forgiven through the public service loan forgiveness or other assistance programs that are listed below.

Teacher loan forgiveness
Law School repayment assistance
National Health Service Corps Loan Repayment Program (The 2023 application cycle is currently closed).

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5 Education Tax Credits and Deductions You Can Claim for 2022

Education tax credits and deductions can provide significant tax savings for individuals paying for higher education expenses. For the 2022 tax year, there are two main education tax credits available: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). In addition, several education-related deductions can be claimed, including the tuition and fees deduction, the student loan interest deduction, and the educator expenses deduction.

The AOTC is a tax credit of up to $2,500 per eligible student and is available for the first four years of post-secondary education. The LLC is a tax credit of up to $2,000 per tax return and is available for unlimited years of post-secondary education.

Education tax deductions can provide a dollar-for-dollar reduction of your taxable income and can be especially valuable for taxpayers who are not eligible for the education tax credits. The tuition and fees deduction provides a maximum deduction of $4,000 for qualified higher education expenses. The student loan interest deduction allows you to deduct up to $2,500 of student loan interest paid during the year. The educator expenses deduction provides a deduction of up to $250 for qualified out-of-pocket expenses incurred by K-12 educators.

It is important to understand the eligibility requirements and rules for each of these education tax benefits and to consult with a tax professional for guidance on how to claim them on your tax return.

Below are 5 Education related Tax Credits & deductions for college.

The American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit (AOTC) is a tax credit of up to $2,500 per eligible student for the first four years of post-secondary education. Here's how it works:

Eligibility: To be eligible for the AOTC, the student must be pursuing a degree or other recognized education credential and must be enrolled at least half-time for at least one academic period that begins during the tax year. Additionally, the student must not have completed the first four years of post-secondary education as of the beginning of the tax year.

Calculation: The AOTC is equal to 100% of the first $2,000 of qualified education expenses plus 25% of the next $2,000 of qualified education expenses. This means that the maximum credit is $2,500 per eligible student.

Refundability: The AOTC is partially refundable, which means that if the credit exceeds your tax liability, you may receive a refund for up to 40% of the unused credit or up to $1,000.

Who can claim the AOTC: The AOTC can be claimed by the taxpayer who pays the qualified education expenses for an eligible student, which is typically the student's parent or guardian. The credit can only be claimed by one taxpayer per eligible student and is subject to income limits.

It is important to consult with a tax professional for guidance on the specific rules and requirements for claiming the AOTC and determine if you are eligible for this tax credit based on your specific circumstances.

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is a tax credit available for post-secondary education expenses, such as tuition and fees, books, and supplies. The credit is worth up to $2,000 per tax return and is available for unlimited years of post-secondary education.

Who can claim the LLC:

The taxpayer, their spouse, or a dependent listed on their tax return must be paying for post-secondary education expenses.

The taxpayer's modified adjusted gross income must be within certain limits, which are subject to change each year.

The LLC can be claimed for any type of post-secondary education, including courses to acquire or improve job skills.

Refundability: The LLC is not refundable, meaning that it can only reduce your tax liability to zero but not generate a refund. If the credit exceeds your tax liability, the excess cannot be refunded or carried forward to future tax years.

It is important to note that the LLC may not be claimed in the same year as the American Opportunity Tax Credit (AOTC) for the same student. Therefore, taxpayers should compare the AOTC and LLC to determine which provides the greatest benefit and consult with a tax professional for guidance.

Student loan interest deduction

The student loan interest deduction is a tax benefit that allows individuals to deduct up to $2,500 of student loan interest paid during the year. Here's how it works:

Eligibility: To claim the student loan interest deduction, the taxpayer must be legally obligated to pay interest on a qualified student loan. The loan must be used solely to pay for qualified higher education expenses for the taxpayer, their spouse, or their dependents.

Income limitations: The student loan interest deduction is subject to income limitations, and the amount of the deduction is gradually reduced for taxpayers with modified adjusted gross income (AGI) between $70,000 and $85,000 for individuals and $140,000 and $170,000 for married couples filing jointly.

How to claim: The student loan interest deduction is claimed as an adjustment to income on Form 1040 or Form 1040-SR.

Deductibility: The student loan interest deduction is not refundable, meaning it cannot be claimed for a tax refund. However, it can still provide significant tax savings by reducing the taxpayer's taxable income.

Educator expense deduction

The educator expense deduction is a tax benefit available to K-12 educators who incur out-of-pocket expenses for classroom supplies and equipment. Here's how it works:

Eligibility: To be eligible for the educator expense deduction, the taxpayer must be a K-12 educator who works at least 900 hours during a school year. The deduction is available for expenses incurred for books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials used in the classroom.

Amount of deduction: The deduction is equal to up to $250 per taxpayer, regardless of the number of students or classrooms the taxpayer works in. The deduction is taken as an adjustment to income and is therefore taken before the calculation of AGI.

How to claim: The educator expense deduction is claimed on Form 1040 or 1040-SR and is reported as an adjustment to income. No itemization is required.

Refundability: The educator expense deduction is not refundable, meaning that it cannot reduce a taxpayer's liability to less than zero. If the deduction reduces a taxpayer's liability to zero, any unused portion of the deduction is lost and cannot be carried forward to future tax years.

Work-related education expense deduction

The work-related education expense deduction allows taxpayers to deduct qualified expenses incurred for education that is required by their employer or the law to maintain their current job or that improves or maintains skills needed in their current job. This deduction can provide a significant tax benefit for individuals who are paying for work-related education expenses.

Who can claim it: To be eligible for the work-related education expense deduction, the education must be directly related to your current job, and you must not be reimbursed for the expenses by your employer. The deduction is available for all taxpayers, regardless of their income level.

How it works: The work-related education expense deduction is an above-the-line deduction, which means it is taken into account before adjusted gross income (AGI) is calculated. This means that it can reduce your taxable income, even if you do not itemize deductions on your tax return.

Is it refundable: No, the work-related education expense deduction is not a refundable credit. This means that if the deduction reduces your taxable income to zero, you will not receive a refund for any remaining amount.

Education Tax Forms

The following are the most commonly used tax forms for claiming education tax credits and deductions:

Form 1098-T: This form is provided by the educational institution and reports the amount of tuition and fees paid and any scholarships or grants received. This form is used to determine eligibility for education tax credits and deductions.

Form 8863: This form is used to claim the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). It must be attached to your tax return and provides information on the education expenses paid and the credit being claimed.

Form 1040: This is the individual tax return form and must be filed by taxpayers eligible to claim education tax credits or deductions. The education tax credits and deductions must be claimed on the appropriate line of Form 1040.

Schedule 1 (Form 1040): This form is used to report other income and adjustments to income. The tuition and fee deduction is claimed on this form.

Schedule A (Form 1040): This form is used to report itemized deductions, including the student loan interest deduction.

Form 2441: This form is used to claim the educator expenses deduction, which provides a deduction of up to $250 for qualified out-of-pocket expenses incurred by K-12 educators.

It is important to keep accurate records of all education credits and loan interest paid during the year and to consult with a tax professional for guidance on the specific rules and limitations that apply to the student loan interest deduction.

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What Education Expenses Are Tax-Deductible in 2024?

Jesus Morales is an Enrolled Agent and has 7 years of bookkeeping and tax experience. He enjoys hiking, traveling, and studying tax law.

Are you spending money to advance your skills or keep up with your field? Good news: That could be a deduction.

Rules for claiming education expenses

Here are the IRS’s guidelines for tax-deductible education expenses.

✓ It allows you to maintain or improve your job skills

Over time, there are updates to the tools, software, and processes you use to do your work. To stay competitive, you need to maintain your level of skill -- and improve on what you already offer.

Training that helps you do this is tax-deductible. That goes for classes and self-study programs.

For example, say you pay for a class that walks you through massive updates to the software you use to provide design services. That counts as maintaining your skills.

Another example: if you take a class for a new program you want to start using for your design work, that counts as improving your skills.

Either way, the IRS will recognize your class as a deductible business expense.

✓ It's required by law to maintain your status

Some professions are required by law to complete continuing education.

For example, a real estate agent in California needs to complete multiple hours of continuing education between license renewal periods. Not meeting this requirement may mean you won’t be able to work.

Since this is required by law, the IRS will allow it as a deduction.

✓ It's related to your current business

The education you’re paying for has to be directly related to the work you’re doing now . It can't qualify you for a new line of work.

A delivery driver , for instance, can’t deduct a class on investigative journalism. But a reporter can.

This rule can be tricky. Say you're a freelance web developer, and you want to take a sales class so you can better sell your services. Even if you have no intention of becoming a salesperson, the IRS may disallow this deduction.

Why? Because your new sales skills could qualify you for a new business, even if that wasn't your intention.

✘ It isn't to "establish" a new business

Speaking of which, the IRS doesn’t allow deductions for educational expenses that help you meet the “minimum requirements” to offer services in a new field.

A DoorDasher wouldn’t be able to write off drivers ed. And someone who wants to be a software engineer can’t write off their first coding course.

What education expenses are tax-deductible?

We’ve been talking mostly about classes. But other types of expenses can qualify too. Here are the basic categories you should look out for:

📖 Course-related books, supplies, and transportation
💳 License renewal fees
📰 Industry magazine subscriptions
🎧 Podcast subscriptions

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Now, let's go over some examples of tax-deductible educational expenses.

School tuition

If you are working toward a part-time degree while freelancing, then you might be able to claim your tuition (and other associated fees.) For example, you might be a freelance consultant going to college on the side.

Just remember: To claim your tuition, you have to already be freelancing in a field related to your degree.

Here is our guide to carrying losses forward for educational expenses on your income tax.

Online web development course

Let’s say you’re a freelance designer who creates branding and marketing assets for small businesses. You start a Coursera course so you can add web design to your roster of services.

That’s considered work-related education, and it's tax-deductible.

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Real estate license renewal

Some industries — like real estate — require licenses or certifications to be periodically renewed. All those fees are tax-deductible.

Just remember: You have to be working in that field right now . The costs associated with getting your real estate license the first time around can’t be written off.

Wall Street Journal subscription

A news subscription can be an effective way to stay up to date with your industry. If it helps you with client small talk and ensures that you sound professional at meetings and conferences, it’s a write-off!

Improv class

If you do a lot of public speaking over the course of your freelance work, an improv class can help you loosen up and feel more comfortable on the job. That means you can deduct the class from your tax bill.

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Another tax break for your educational expenses

You can't always claim your education expenses as a business deduction. But there's another tax break you might be able to claim.

Enter the Lifetime Learning Credit. You can use it to pay for courses at a college, university, or trade school.

The Lifetime Learning Credit is worth up to $2,000 per tax return. It comes with a gross income limit of $69,000 (or $138,000, if you file jointly).

Jesus Morales-Grace, EA

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What Education Expenses Are Tax-Deductible in 2024?

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Education Tax Credits & Deductions: Updated for 2023 & 2024

This education tax credit and deductions overview has been updated for the 2023 and 2024 tax years . Many readers of this site are completing school for the first time or plan to go back to school to further their education. So, I’ve compiled a list of education tax credits and deductions in 2023 for those completing their tax returns and looking ahead to 2024. There were some notable changes in recent years with new legislation. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 repealed the tuition and fees deduction for tax years beginning in 2021, in exchange for increased income limitations for the Lifetime Learning Credit.

A few years back, Mrs. 20SF returned to school to complete a post-secondary accelerated nursing degree program, without any government or other assistance. While comparatively inexpensive – she went the community college route – it was still a big out-of-pocket cost.

During that time, I thoroughly researched the various education tax credits and deductions available to us and have shared a summary here to help others. In recent years, there has been some changes in what deductions and credits are available. Some were extended with congressional budget agreements, while others were left behind. The good news is that if you’re paying for school (for yourself or others), there are a number of education tax credits and deductions still available to you in 2023 and 2024. I’ll cover each in detail.

American Opportunity Tax Credit (2023 & 2024 Details)

The American Opportunity Tax Credit (AOTC) is the major student tax credit available. This tax credit had been set to expire a few years ago, but was permanently extended through a Congressional budget deal.

Some of you may remember the “Hope Credit”. The American Opportunity Credit is actually a modified replacement to the Hope Credit that was created under the American Recovery and Reinvestment Act (ARRA). It’s a bit different than the Hope Credit in that it can be claimed for 4 years of post-secondary education, instead of just 2. Note: any prior claiming of the Hope Credit counts against the 4 years cap for the American Opportunity Tax Credit.

Here is a breakdown of how this education tax credit works and who is eligible, for both 2023 and 2024:

Eligibility: The student must be enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential for at least one academic period beginning during the tax year. Also, the student had not completed the first four years of post-secondary education – so grad students cannot take this credit.
Credit Amount (for 2023 and 2024): up to $2,500 of the cost of tuition, fees and course materials paid during the taxable year per eligible student . Tax credit can be received for 100% of the first $2,000, plus 25% of the next $2,000 that has been paid during the taxable year.
Income Limits & Phaseout (for 2023 & 2024): a taxpayer whose modified adjusted gross income is $80,000 or less ($160,000 or less for joint filers) can claim the credit for the qualified expenses of an eligible student. The credit begins to phase out above those MAGI levels. If modified adjusted gross income is greater than $90,000 ($180,000 for joint filers), no credit can be claimed.
How to Claim: Determine your eligibility, credit amount, and claim the credit by filling out IRS Form 8863 . New this year: To claim the American Opportunity Credit, you must provide the educational institution’s employer identification number (EIN) on your Form 8863. You also need to file form 1098-T , which you should receive early in the year from your educational institution. It’s also worth noting that even if your income level falls below the standard minimum income to file taxes thresholds, you need to file a tax return in order to be able to claim this tax credit.
Refundable Status: 40% of the credit (up to $1,000) is refundable. This means you can get a refund even if you owe zero tax.
School Eligibility: You can only claim the credit if you’re attending an accredited institutions. You can search the U.S. Department of Education’s database of accredited institutions to confirm eligibility.
Credit can be Received for: tuition, and required fees and course materials.
Ineligible Expenses: You cannot receive a credit for: room and board, insurance, transportation, expenses paid with tax-free assistance, medical expenses, expenses used for another deduction or credit, and student fees that are not required as condition of enrollment or attendance.
More Info: see this IRS resource .

Lifetime Learning Credit (2023 & 2024 Details)

The other big education tax credit currently available is the Lifetime Learning Credit (LLC). You cannot claim both the American Opportunity Credit and the Lifetime Learning Credit within the same calendar year for the same student (although you could claim both for two different students). So what’s the difference between the two credits?

Here is a rundown of how Lifetime Learning education tax credit works and who is eligible:

Eligibility: for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses – including courses to acquire or improve job skills.
Credit Amount (for 2023 and 2024): up to $2,000 of the cost of tuition, fees and course materials paid during the taxable year per tax return. Tax credit can be received for 20% of the first $10,000 in eligible expenses.
Income Limits & Phaseout (for 2023 and 2024): the credit starts phasing out at an increased MAGI of $80,000 ($160,000 for joint filers) and 100% phaseout occurs at a MAGI of $90,000 ($180,000 for married filing jointly) in 2023 and 2024.
How to Claim: Determine your eligibility, credit amount, and claim the credit by filling out IRS Form 8863 .
Refundable Status: This credit is non-refundable. This means you cannot get a refund if you owe zero tax.
School Eligibility: Available for all years of post-secondary education and for courses to acquire or improve job skills. Does not need to be an accredited institution.

Lifetime Learning Credit Vs. American Opportunity Credit

The Lifetime Learning Credit (LLC) is similar to the American Opportunity Credit, but with a a few key differences. You do not need to be pursuing a degree to be eligible to claim the Lifetime Learning Credit. You could be completing career development classes to learn or improve job skills, for example.

You can claim the American Opportunity Credit for the same student for no more than 4 tax years. There is no limit on the number of years for which you can claim a Lifetime Learning credit based on the same student’s expenses.

The Lifetime Learning credit is also non-refundable, whereas the American Opportunity Credit is partially refundable (meaning that if you have a net tax liability below $0, it could count towards a tax refund). And it has a $2,000 annual maximum vs. $2,500 for the AOC. For these reasons, the AOC is preferable to the LLC, if you have a choice between the two.

Student Loan Interest Deduction (2023 & 2024 Details)

You may be able to deduct interest you pay on a qualified student loan. Generally, the amount you may deduct is the lesser of $2,500 or the amount of interest you actually paid.

The deduction is claimed as an above-line adjustment to income so you do not need to itemize your deductions .

You can claim the deduction if all of the following apply:

You paid interest on a qualified student loan in the tax year you are filing for.
You are legally obligated to pay interest on a qualified student loan.
Your filing status is not “married filing separately”.
2023 MAGI phaseout limits: you are eligible for a full deduction if modified adjusted gross income (for 2024) is less than $75,000 when filing as single, head of household, or qualifying widower ($155,000 for married filing jointly). The deduction is reduced (phased out) when your modified adjusted income is between $75,000 and $90,000 when filing as single, head of household, or qualifying widower (and between $155,000 and $185,000 for filing married filing jointly). Eligible deduction is $0 when above those income thresholds.
2024 MAGI phaseout limits: you are eligible for a full deduction if modified adjusted gross income (for 2024) is less than $80,000 when filing as single, head of household, or qualifying widower ($165,000 for married filing jointly). The deduction is reduced (phased out) when your modified adjusted income is between $80,000 and $95,000 when filing as single, head of household, or qualifying widower (and between $165,000 and $195,000 for filing married filing jointly). Eligible deduction is $0 when above these income thresholds.
You and your spouse, if filing jointly, cannot be claimed as dependents on someone else’s return.
You have received form 1098-E from the educational institution for filing purposes, for those who paid over $600 in interest.

Tuition and Fees Education Tax Deduction Was Repealed (Expired for 2023 & 2024, and beyond)

The tuition and fee education tax deduction was repealed for years starting in 2021 (and is not available in 2023, 2024, and beyond) as a result of the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

Tax Advantaged 529 Plans and Coverdell Education Savings Accounts

Coverdell Education Savings Accounts and 529 Plans are tax advantaged savings accounts for education expenses. I highlight both at length in the referenced links, but to summarize, each allows you to contribute savings for future education expenses, with earnings and distributions being tax-free for qualified expenses. You can even use a 529 plan for your own education expenses .

One big (and controversial) change under the Republican Tax Reform is that families can now withdraw up to $10,000 tax-free per year for K-12 at private or parochial schools. Previously, ESAs could be used for this, but contributions were capped at $2,000 per year. If you have an ESA, you can roll it over to a 529, tax-free.

Disclaimer:

Please keep in mind that I’m not a tax pro, so I’d definitely recommend you refer to one or at least read through the IRS documentation on your own as well. For more information, definitely check out IRS publication 970: Tax Benefits for Education and rely on a tax professional or tax software to walk you through eligibility.

Additionally, all of the major tax programs will help you work through the paperwork. Check out my list of the best tax software and cheapest ways to e-file for more info, including feature comparisons.

Education Tax Credit & Deduction Discussion:

Have you taken advantage of any of the above education tax credits or deductions?
Does the expiration of the education tax deduction impact you this year?

The Student Debt Cocktail

Education Tax Deductions

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on January 26, 2024

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Table of contents, what are education tax deductions.

Education tax deductions are specific tax benefits the federal government provides to help taxpayers reduce their taxable income by claiming certain education-related expenses.

These deductions are designed to alleviate students' and their families' financial burden of pursuing higher education.

Individuals can save thousands of dollars on their tax bill by claiming these deductions, depending on the specific deduction and their eligibility.

The importance of education tax deductions must be balanced. By providing financial incentives for taxpayers to invest in education, the government is promoting higher education and helping to create a more skilled workforce.

This can ultimately lead to higher overall economic productivity and a more prosperous society.

Education tax deductions can make education more accessible to those who may not have been able to afford it otherwise, helping to reduce income inequality and create more opportunities for social mobility.

Types of Education Tax Deductions

Tuition and fees deduction, eligible expenses.

The Tuition and Fees Deduction allows taxpayers to reduce their taxable income by up to $4,000 for qualified education expenses.

Qualified expenses include tuition, enrollment fees, and other required expenses necessary to attend an eligible educational institution. However, this deduction does not cover expenses such as room and board, transportation, or personal living expenses.

Income Limits

Taxpayers must meet certain income requirements to be eligible for the Tuition and Fees Deduction.

The deduction is gradually phased out for taxpayers with a modified adjusted gross income (MAGI) between $65,000 and $80,000 for single filers and between $130,000 and $160,000 for joint filers.

Taxpayers with a MAGI above these limits are not eligible for this deduction.

Student Loan Interest Deduction

The Student Loan Interest Deduction allows taxpayers to deduct the interest paid on qualified student loans during the tax year. Qualified student loans are those taken out solely to pay for higher education expenses, such as tuition, fees, room and board, books, and supplies.

The interest paid on these loans can be deducted, reducing the taxpayer's overall taxable income.

Taxpayers must meet specific requirements to be eligible for the Student Loan Interest Deduction. First, the loan must be taken out for the taxpayer, their spouse, or their dependent.

Second, the student must be enrolled at least half-time in a degree, certificate, or other recognized educational program at an eligible educational institution.

Third, the taxpayer's MAGI must be below specific income limits.

American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit (AOTC) is a tax credit available for eligible taxpayers to help offset higher education costs. Qualified expenses for the AOTC include tuition, fees, and course materials such as books and supplies.

However, unlike the Tuition and Fees Deduction, the AOTC also covers some expenses for course-related equipment and supplies required for enrollment or attendance.

The AOTC is subject to income limits, determining a taxpayer's credit eligibility. The full credit is available for taxpayers with a MAGI of $80,000 or less for single filers and $160,000 or less for joint filers.

The credit is gradually phased out for taxpayers with a MAGI between $80,000 and $90,000 for single filers and between $160,000 and $180,000 for joint filers. Taxpayers with a MAGI above these limits are not eligible for the AOTC.

Lifetime Learning Credit (LLC)

The Lifetime Learning Credit (LLC) is another tax credit available to help taxpayers offset the cost of higher education. The LLC covers qualified expenses such as tuition and fees required for enrollment or attendance at an eligible educational institution.

However, unlike the AOTC, the LLC does not cover expenses for course materials like books and supplies. Additionally, the LLC is available for unlimited years, making it an attractive option for students pursuing continuing education or graduate studies.

Similar to the AOTC, the LLC is subject to income limits. The full credit is available for taxpayers with a MAGI of less than $80,000 for single filers and less than $160,000 for joint filers.

Comparison of Education Tax Deductions

Tuition and fees deduction vs student loan interest deduction.

When comparing the Tuition and Fees Deduction and the Student Loan Interest Deduction, it is essential to consider each deduction's specific eligibility requirements and benefits.

The Tuition and Fees Deduction can reduce taxable income by up to $4,000, while the Student Loan Interest Deduction allows for a maximum deduction of $2,500.

However, the Student Loan Interest Deduction is available to a broader range of taxpayers, as it has higher income limits than the Tuition and Fees Deduction.

AOTC vs LLC

When choosing between the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), taxpayers should consider their specific educational situation and expenses.

The AOTC is more beneficial for undergraduate students, as it covers a broader range of expenses, including course materials, and offers a higher credit amount of up to $2,500 per student.

In contrast, the LLC is more suited for graduate students and those pursuing continuing education, as it is available for unlimited years but offers a lower credit amount of up to $2,000 per taxpayer.

Eligible Educational Institutions

Definition of eligible educational institutions.

Eligible educational institutions are those that meet specific criteria set forth by the Internal Revenue Service (IRS) for the purposes of education tax deductions and credits.

These institutions typically participate in federal student aid programs administered by the U.S. Department of Education and provide education beyond high school.

Types of Eligible Institutions

Post-secondary institutions.

Post-secondary institutions include colleges, universities, and other institutions offering education beyond high school.

These institutions may offer various degree programs, such as associate, bachelor's, master's, and doctoral degrees, as well as certificate programs and vocational training.

Vocational Schools

Vocational schools are institutions that provide specialized training in specific trades or occupations. These schools typically offer programs that lead to a certificate or other recognized credentials, preparing students for entry into a particular field of work.

Non-traditional Educational Programs

Non-traditional educational programs, such as online or distance learning programs, can also qualify as eligible educational institutions if they meet the necessary criteria.

These programs often provide flexibility for students who cannot attend traditional on-campus classes due to work, family, or other commitments.

Education Tax Deductions for Continuing Education

Definition of continuing education.

Continuing education refers to any educational program or coursework taken after completing a primary course of study, such as a bachelor's degree.

This can include graduate studies, professional development courses, and other types of learning opportunities to enhance an individual's knowledge and skills in their field of work.

Eligible expenses for continuing education tax deductions and credits typically include tuition and fees required for enrollment or attendance at an eligible educational institution.

These expenses may be eligible for deductions or credits such as the Lifetime Learning Credit, specifically designed to help offset continuing education costs.

However, certain expenses, such as books, supplies, and course materials, may not be covered, depending on the specific deduction or credit being claimed.

Eligibility Requirements

To be eligible for education tax deductions and credits related to continuing education, the taxpayer must meet specific requirements.

First, the taxpayer or their dependent must be enrolled in an eligible educational institution. Second, the expenses must be directly related to pursuing a recognized credential or improving job skills.

Third, the taxpayer's MAGI must fall within the income limits for the specific deduction or credit being claimed.

Education Tax Deductions for Educators

Educator expense deduction.

The Educator Expense Deduction allows eligible K-12 teachers, instructors, counselors, principals, and aides to deduct up to $250 of unreimbursed expenses related to their professional duties.

Qualified expenses include the cost of books, supplies, computer equipment, software, and other materials used in the classroom.

Additionally, expenses related to professional development courses that directly relate to the educator's teaching activities may also be eligible.

The taxpayer must meet specific criteria to be eligible for the Educator Expense Deduction.

First, they must work at least 900 hours per school year in a school that provides elementary or secondary education, as determined under state law.

Second, the expenses must be incurred to maintain or improve the educator's skills in their profession.

Finally, the expenses must not have been reimbursed by the school or another source.

Teacher Professional Development Expenses

Teacher professional development expenses include costs associated with attending workshops, conferences, seminars, and other training programs that help educators improve their teaching skills and knowledge.

These expenses may be eligible for tax deductions or credits, such as the Lifetime Learning Credit or the Educator Expense Deduction, depending on the specific nature of the expenses and the eligibility requirements of the deduction or credit being claimed.

The taxpayer must meet specific eligibility criteria to claim tax deductions or credits for teacher professional development expenses.

First, the educator must be employed by a qualifying educational institution. Second, the expenses must be directly related to the educator's professional development and improvement of job skills.

Recordkeeping and Documentation

Importance of maintaining records.

Maintaining accurate records of education-related expenses is crucial when claiming education tax deductions and credits.

Proper documentation helps ensure that taxpayers claim the correct amount of deductions and credits and can provide evidence to support their claims in the event of an audit by the IRS.

Types of Documentation Required

Documentation for education tax deductions and credits should include receipts, invoices, canceled checks, or other proof of payment for qualified expenses.

Additionally, taxpayers should maintain enrollment and attendance records at eligible educational institutions, such as transcripts, course catalogs, or other official documents.

Employment documentation and hours worked may also be necessary for educators claiming the Educator Expense Deduction or deductions for professional development expenses.

Retention Period for Tax Records

The IRS recommends retaining tax records for at least three years from the date the tax return was filed or two years from the date the tax was paid, whichever is later.

In some cases, such as when a substantial understatement of income has occurred, the retention period may be longer.

It is essential to maintain accurate and complete records to support education tax deductions and credit claims for the required retention period.

IRS Resources and Assistance

Irs publications related to education tax deductions.

The Internal Revenue Service (IRS) provides various publications and resources to help taxpayers understand and claim education tax deductions and credits. Key publications include:

Publication 970: Tax Benefits for Education - Provides an overview of education tax benefits, including deductions and credits, along with detailed information on eligibility requirements and claiming procedures.

Form 8863: Education Credits - The form used to claim the American Opportunity Tax Credit and the Lifetime Learning Credit, along with instructions for completing the form.

Publication 5348: Tax Reform Basics for Individuals and Families - Offers a summary of changes to individual tax provisions, including education tax benefits, resulting from the Tax Cuts and Jobs Act.

Tax Software and Tools

Many tax software programs and tools are available to assist taxpayers in calculating and claiming education tax deductions and credits.

These programs typically guide users through the process of determining their eligibility for various deductions and credits, calculating the correct amounts, and completing the necessary tax forms.

Using tax software can help ensure that taxpayers accurately claim the maximum education tax benefits to which they are entitled.

Taxpayer Assistance Programs

The IRS offers several taxpayer assistance programs to help individuals with questions or concerns about education tax deductions and credits. These programs include:

Volunteer Income Tax Assistance (VITA) - Provides free tax help to low- to moderate-income individuals who need assistance in preparing their tax returns. VITA sites are typically located at community centers, libraries, schools, and other convenient locations.

Tax Counseling for the Elderly (TCE) - Offers free tax help to individuals aged 60 and older, focusing on pension and retirement-related issues unique to seniors.

Low-Income Taxpayer Clinics (LITCs) - Provide representation and assistance to low-income taxpayers in disputes with the IRS, as well as education and outreach on taxpayer rights and responsibilities.

Education tax deductions and credits, such as the Tuition and Fees Deduction, Student Loan Interest Deduction, American Opportunity Tax Credit, and Lifetime Learning Credit, provide valuable financial assistance to taxpayers pursuing higher education or supporting dependents in their educational pursuits.

These deductions and credits help offset the cost of tuition, fees, and other education-related expenses, making higher education more accessible to a broader range of individuals.

Understanding and maximizing education tax deductions and credits can significantly impact a taxpayer's financial situation.

By taking advantage of these tax benefits, individuals can reduce their taxable income, save thousands of dollars on their tax bill, and invest in their future or the future of their dependents.

Taxpayers must familiarize themselves with the various deductions and credits available, eligibility requirements, and claiming procedures to maximize their education tax benefits.

Education Tax Deductions FAQs

What are education tax deductions, and who can claim them.

Education tax deductions are tax benefits that allow taxpayers to reduce their taxable income by deducting certain education-related expenses. Eligibility for these deductions typically depends on factors such as the taxpayer's income level, filing status, and whether the education expenses were incurred for the taxpayer, their spouse, or their dependents.

Can I claim education tax deductions for tuition and fees paid for my own education?

Yes, you may be eligible to claim education tax deductions for tuition and fees paid for your own education. The Tuition and Fees Deduction allows eligible taxpayers to deduct qualified education expenses for themselves, their spouse, or their dependents. However, income limits and other criteria must be met to qualify for this deduction.

Are there any education tax deductions available for educators and teachers?

Yes, the Educator Expense Deduction is an education tax deduction specifically for educators and teachers. Eligible educators can deduct up to $250 of unreimbursed expenses for classroom supplies, materials, and professional development. To qualify, educators must work at least 900 hours in a school that provides elementary or secondary education during the school year.

Can I claim education tax deductions for student loan interest payments?

Yes, the Student Loan Interest Deduction is an education tax deduction that allows eligible taxpayers to deduct up to $2,500 of the interest paid on qualified student loans. The deduction is available for interest paid on loans taken out for the taxpayer, their spouse, or their dependents. Income limits and other requirements must be met to qualify for this deduction.

Are there any education tax deductions available for job-related education expenses?

Yes, job-related education expenses may qualify for education tax deductions if they meet certain criteria. If the education is required by your employer or by law to maintain your current job, or if it improves or maintains skills needed in your current job, you may be able to deduct these expenses as a miscellaneous itemized deduction. However, you cannot deduct education expenses that qualify you for a new trade or business. Note that tax laws change frequently, so it's important to consult with a tax professional or the IRS for the most up-to-date information.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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Student, Education
Student Tax Credits
Savings Plans
Teacher Deductions

Student Education Tax Credits

There are two major education tax credits available to students to help offset the costs of higher education: The American Opportunity Credit and the Lifetime Learning Credit . These college tax credits may help save you money on your income tax return. Tax credits are frequently more valuable than tax deductions because they reduce your tax bill dollar-for-dollar while deductions only reduce your taxable income . When you file your current year taxes with eFile.com , you can answer simple, tax-related questions and we will determine the best options for credits and deductions to automatically be reported on your return due on the April IRS Tax deadline .

Key points:

Tax credits reduce your taxes dollar-per-dollar; use tax software to help you claim them so you pay less taxes this year.
You cannot claim the AOTC and LLC for the same student in the same year, but you can claim both if there are more than one student on one return and you are qualified to do so.
In addition to tax credits, save money on various expenses as a college student by reviewing a collection of money saving tips below.
The American Opportunity Credit and the Lifetime Learning Credit may help you save on your individual income taxes if you have college expenses - earned income is not a requirement for the American Opportunity Credit.

The American Opportunity Credit is a partially refundable tax credit as it allows for up to 40 percent of the credit as a tax payment if you qualify to claim it for education expenses. This means you may get money back on your taxes as a student. When you prepare and e-file your taxes, the eFile.com Tax App will separately calculate the refundable and nonrefundable portion of your education credits on Form 8863 for you and eFileIT with your return.

Education Tax Credits Compared

How do you know which education tax credit you can claim or which benefits you the most? Refer to this simple table for a side-by-side comparison. For specific details find each section below:

The American Opportunity Credit (AOTC) | The Lifetime Learning Credit (LLC)

You can also make it easy on yourself by filing on eFile.com - the eFile Tax App will take your answers to simple questions and show you which credit you should claim. You can always manually select the credit you want, but eFile has your best interest in mind - start free and see how much money you can save with your education tax credit.

How to Save Money as a College Student

With rising costs of tuition, college students are always looking for ways to save money both on their income tax return and on general daily expenses. If you have debt from student loans, you can write off any interest paid as an above-the-line deduction . Keep up with details on the other details on students and taxes .

As a student, keep track of your spending and find ways to save money during your time at school. When you save enough money, you can pay off your student debt as you attend classes, meaning you will graduate with a smaller burden of debt. See simple tips and ways on saving money during the year:

Work, transportation, and travel Entertainment, technology, and health Home, shopping, and food Everyday expenses, finances, and more

You can also save money on taxes by keeping track of your spending, understanding your deductions , maximizing tax-free income , and using tax software to claim all credits and deductions you are entitled to.

You can claim tax credits while you're in school that may help pay your taxes if you work while attending school. If you are a dependent on someone else's return , such as a parent, then they can claim you and receive this credit as it may benefit them more. You can obtain your 1098-T form from your school or university and use it to report your school information. The American Opportunity Credit and Lifetime Learning Credit are the two federal tax credits available for students and parents of students.

Because tax credits are more beneficial and take less effort to claim, the IRS has done away with the Tuition and Fees Deduction. This is because that deduction required that the student tracks purchases in order to write off their education expenses whereas claiming a tax credit is much more straight forward. This means you cannot write off a laptop, books, or other educational expense on your return; instead, you can claim a tax credit.

You cannot claim either education tax credit if you are claimed as a dependent on someone's return, if you file as married separately, or if you are a non-resident alien during the year.

See more details on tax benefits for education via IRS Publication 970 .

The American Opportunity Credit (Formerly the Hope Credit)

Of the two education credits currently available, the American Opportunity Credit or AOTC is the most valuable. The American Opportunity Credit is an expanded version of the Hope Credit and may get you up to $2,500. Here is what you need to know:

The American Opportunity Credit applies only to the first four years of post-secondary school education (university, college, vocational school, nonprofit and for-profit institutions). In other words, you can not claim the AOTC for more than four years.
You can claim up to $2,500 per eligible student, per year .
The person in question must be pursuing a degree.
You, your dependent, or a third party must have paid the education expenses for an eligible student enrolled at an eligible educational institution .
The credit covers 100% of the first $2,000 of qualified tuition, required fees, and qualified expenses, plus 25% of the next $2,000 (or, $500). You can claim the full American Opportunity Credit if you have at least $4,000 in qualified education expenses.
40% of the credit is refundable , so you may receive up to $1,000 per eligible student as a tax refund even if you owe no tax.
Each student for which you claim the credit must have been enrolled at least half-time for at least one academic period which began during the current Tax Year.
The limit on modified adjusted gross income (MAGI) is $160,000 if married filing jointly and $80,000 if single , head of household , or qualifying widow (er). You can receive a reduced credit if your income is between $80,000 - $90,000 or $160,000 - $180,000. This means you can not claim the credit if your MAGI is over $90,000 ($180,000 for married filing jointly). Not sure what your filing status is? Use the eFile.com STATucator tool to determine your status by answering a few simple questions.
You may claim the credit for education expenses you paid for yourself, your spouse, or your qualifying dependent . You may not take the credit for yourself if you are claimed as someone else's dependent.
Qualified expenses include tuition and required fees, books, supplies, equipment, and other required course materials (but not room and board).
Any felony drug convictions by the end of the tax year disqualify the student from receiving the American Opportunity Credit. If you have had the AOTC disallowed in a previous year, eFile can help you file Form 8862 for disallowed credits.

In general, the AOTC is the most significant way to save on taxes as a college student pursuing a four-year degree. This credit acts as a tuition tax credit; while it does not get paid in advance , you can claim it on your taxes. When you add your school information to your eFile account, the tax app will determine the best credit for you to claim and apply it to your return. eFile will only claim the credit if you qualify for it based on your entries; sign up for free here .

The Lifetime Learning Credit or LLC

If you, your spouse, or your dependent do not qualify for the American Opportunity Credit, you may still be able to claim the Lifetime Learning Credit. The Lifetime Learning Credit is a non-refundable tax credit . Here is what you need to know about this education credit:

The Lifetime Learning Credit applies to undergraduate, graduate, professional degree courses, and even to post-graduate courses that help improve your job skills. It is claimed on a per return basis, not a per student basis.
You can claim up to $2,000 per eligible student, per year.
The credit is available for any and all years of post-secondary education as well as for adult and continuing education courses. There is no limit on how many years you can claim the credit.
There is no minimum enrollment requirement.
The amount of your credit will be 20% of the first $10,000 of combined post-secondary tuition and fees you paid, totaling no more than $2,000 (per year, not per student).
Because the Tuition and Fees Deduction is no longer available, the Lifetime Learning Credit income limitations have received an increased value. For the current tax year , the limit on modified adjusted gross income (MAGI) is $180,000 if married filing jointly and $90,000 if single , head of household , or qualifying widow (er). This means you can not claim the credit if your MAGI is over $90,000 ($180,000 for married filing jointly). Not sure what your filing status is? Use the eFile.com STATucator tool to determine your status by answering a few simple questions.
The Lifetime Learning Credit is not refundable , so it will not be paid to you in a refund - it simply decreases your tax liability.
You may claim the credit for qualified expenses you paid for yourself (if you were not claimed as a dependent), your spouse, or your dependent.
Qualified expenses include tuition and required fees only (room and board is not included).
Felony drug convictions do not make the student ineligible for the Lifetime Learning Credit.

College Tax Credit Rules, Examples

You cannot claim both the Lifetime Learning Credit and the American Opportunity Credit for the same student in the same year, but you can claim one credit for one student and the other credit for another student or the AOTC for each. Remember that the American Opportunity Credit is generally the more valuable tax credit, but it is only good for the first four years of higher education and has stricter enrollment requirements. If you qualify for the Lifetime Learning Credit, you can claim it any number of years. When you prepare your return on eFile.com , we will help you determine which education credit or deduction you qualify for and which one will be the most beneficial to you. We will then generate the correct forms for you in order to claim the education credit or deduction(s) with your return.

Example 1: You and your spouse have two young adult dependent children enrolled in school pursuing an undergraduate degree while you are taking online courses for your job. You have a degree from four years of college education. You could claim the American Opportunity Credit for each of your two children and also claim the Lifetime Learning Credit for yourself since you have already completed your first for years of school. You would not be able to claim anything for your spouse if they do not go to school.

Example 2 : You have two kids who are enrolled in college at ages 18 and 21. The younger child lives with you and you will claim them as a dependent on your return; the older one lives on their own and works part-time and you will not claim them. When you file your taxes, claim your younger dependent as well as the AOTC on your return while your older dependent files their own tax return and claims the AOTC on their tax return.

To be able to claim the American Opportunity Tax Credit or the Lifetime Learning Credit (LLC), you must have received the Form 1098-T, Tuition Statement, for you or your dependent from an eligible educational institution either in the U.S. or abroad - see details on U.S. citizens earning income abroad . You or your dependent should typically receive the 1098-T form by January 31. When you prepare your return on eFile.com, you will be able to enter the information right from your 1098-T and we will generate the forms necessary to claim either education credit on your tax return.

Eligible Educational Institution

An eligible educational institution is a school offering higher education beyond high school. It is any college, university, trade school, or other post secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education. This includes most accredited public, nonprofit and privately-owned–for-profit postsecondary institutions. If you are not sure if your school qualifies, you can ask or see if your school is listed here .

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The ‘grandparent loophole’ is putting much-needed money back in the pockets of college students — here's how it's helping younger Americans

P ost-secondary education is an expensive proposition, so it’s not surprising that many older Americans want to help their grandchildren pay for some of it.

Fortunately, this has become a little easier thanks to the new “grandparent loop,” which is part of the recent changes made to the 2024-25 Free Application for Federal Student Aid (FAFSA).

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In 2023-24, the average annual cost of tuition and fees for a full-time undergraduate student enrolled in a four-year program ranged from $11,260 for a public in-state institution to $41,540 for a private non-profit institution, according to the College Board.

Although the increase in tuition from the previous year was less than the rate of inflation, these fees still increased by 2.5% and 4.0%, respectively.

But tuition isn’t the only expense. On average, housing and food expenses cost $12,770 annually for a four-year public in-state program and $14,650 for a private non-profit program, according to the College Board. Students also need to factor in the cost of books, software and hardware, which have all been impacted by the recent period of high inflation.

How the 529 savings account can help

A 529 savings account is designed to help families save for a child’s education. It’s a tax-advantaged account that’s typically opened by a parent (or grandparent), with the child designated as the beneficiary.

Contributions are considered gifts — the amount that’s exempt from the IRS gift tax is $18,000 per year for individuals and $36,000 for married couples.

Money grows tax-deferred in the account, with some states also offering tax deductions on contributions. If withdrawals are made for qualified education expenses (as defined by the IRS), they won’t be subject to state or federal taxes.

Qualified education expenses include tuition, mandatory fees, room and board, books and other school-related expenses. Withdrawals can be used for tuition at any U.S. college or university, as well as some international institutions.

But for many students, their savings aren’t enough to fund an education, so they still require some form of financial aid. In 2022-23, for example, the average aid per full-time equivalent undergraduate student was $15,480, according to the College Board.

In addition, the Education Data Initiative reported that the average federal student loan borrower has $37,088 outstanding.

Read more: Rich young Americans have lost confidence in the stock market — and are betting on these assets instead . Get in now for strong long-term tailwinds

The ‘grandparent loophole’

To apply for student aid — including grants, scholarships and loans — from more than 6,400 colleges and universities in the U.S., you’ll need to fill out a Free Application for Federal Student Aid (FAFSA).

The form, which collects demographic and income information, allows you to list up to 10 schools that you’d like to attend. If you’re successful in getting aid, you’ll hear back directly from these schools.

It’s here that the “grandparent loophole” now exists. Starting with the 2024-25 FAFSA, an applicant's total income will be calculated directly from the IRS Data Retrieval Tool (DRT), so it will only be based on their federal income tax return. This means that cash support, such as disbursements from a grandparent’s 529, won’t affect financial aid eligibility.

Previously, distributions from a grandparent-owned 529 plan had to be reported as untaxed student income, which could reduce financial aid eligibility by as much as 50% of the withdrawal amount.

Now, grandparents, or other family members and friends, can gift money to a student without hurting the student’s eligibility for financial aid.

Maximizing the benefits of the 529

To maximize the benefits of a 529 , open it as early as possible so your investments have more time to grow. You also have the option to gift five years’ worth ($90,000 for an individual and $180,000 for a couple) in one lump sum and still avoid the gift tax.

It can pay to consult a financial advisor to help optimize the portfolio you build from your contributions. It may also be a good idea to move to a more conservative portfolio before you need to start taking withdrawals, which can help preserve the gains you’ve made and ensure the money will last.

However, make sure withdrawals from the plan are used only for qualified expenses — you’ll face heavy tax penalties if they’re spent on non-qualified expenses.

Credits & Deductions

INFORMATION FOR...
Businesses & Self-Employed
Earned Income Credit (EITC)
Child Tax Credit
Clean Energy and Vehicle Credits
Standard Deduction
Retirement Plans

Forms & Instructions

POPULAR FORMS & INSTRUCTIONS
Form 1040 Instructions
Form 4506-T
POPULAR FOR TAX PROS
Form 1040-X
Circular 230

Here’s what taxpayers need to know about higher education tax credits

Here are some important things taxpayers should know about these credits.

The american opportunity tax credit is:.

Worth a maximum benefit of up to $2,500 per eligible student.
Only for the first four years at an eligible college or vocational school.
For students pursuing a degree or other recognized education credential.
Partially refundable. People could get up to $1,000 back.

The lifetime learning credit is:

Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify.
Available for all years of postsecondary education and for courses to acquire or improve job skills.
Available for an unlimited number of tax years.

To be eligible to claim either of these credits, a taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution. There are exceptions for some students.

Taxpayers can use the Interactive Tax Assistant tool on IRS.gov to find out if they're eligible for these credits.

More information:

Compare Education Credits
Publication 970, Tax Benefits for Education

Subscribe to IRS Tax Tips

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Education | Colorado will ease path to college by paying…

Education | Colorado will ease path to college by paying back 2 years of tuition for lower-income students

Hb24-1340 will pay out through refundable state income tax credit available to qualifying students.

A graduate returns to his seat after being recognized on stage and receiving his diploma during the May 2022 Aims Community College Commencement ceremony in the Aims Welcome Center in Greeley May 13, 2022. (Alex McIntyre/Greeley Tribune)

Supporters of the legislation — HB24-1340 , passed on the final day of the session — tout it as an important step to improve access to postsecondary education in Colorado. House Speaker Julie McCluskie previously called the bill “the sleeper of the session.”

“We know the cost of college has been an obstacle for students for many, many years,” said Angie Paccione, executive director of the Colorado Department of Higher Education. “If it’s not an actual barrier, it’s a perceived barrier. This is a way to eliminate that perception and to really make it affordable.”

But since many of the state’s higher education institutions already have programs that cover tuition for low-income families — typically those making below $60,000 to $70,000 a year — supporters of the bipartisan measure say it should particularly help middle-income families earning closer to that $90,000-a-year cutoff.

“I hope that people understand our state used to be a place where we were able to invest more to hold tuition costs down,” said Rep. Shannon Bird, a Westminster Democrat who was one of the bill’s sponsors. “With competing pressures on budget and TABOR, that has taken away our ability to fund higher education the way we used to.

However, the bill differs from the typical tuition promise programs that many Colorado colleges already offer to low-income students. The new legislation will reimburse families through a refundable state income tax credit, meaning eligible students must pay tuition and fees on their own and then receive refunds after the next tax season.

Some local education experts warned the retroactive payment would still hinder struggling families in affording college if they have to come up with the money upfront.

Legislative sponsors and state higher education leaders said the bill is a boon for middle-income families who may make too much to qualify for significant financial aid but are still burdened by the cost of degree or certificate attainment.

“This is a way to lift up more of our families,” Bird said.

Polis is expected to sign the bill, according to a statement from the governor’s office on Friday. “I’m so excited that community college will now be free for all families under $90,000, this is a big step forward for saving people money on tuition,” Polis said.

To qualify for the tax credit, students must:

Have a household adjusted gross income of $90,000 or less
Enroll in an in-state public college, university or technical college within two years of graduating from a Colorado high school
Seek a degree or credential
Submit a Free Application for Federal Student Aid or a Colorado Application for State Financial Aid
Complete at least six credits for the applicable semesters
Maintain a 2.5 GPA for the applicable semesters

Students can claim up to 65 credit hours across all years the tax credit is used. The credit is expected to average $2,700 for students at four-year colleges, $2,000 for students at area technical colleges and $1,000 for students at two-year colleges, according to the bill’s fiscal note .

Eligible students can begin claiming the credit on their 2025 taxes — meaning students starting school as soon as this fall can benefit.

About 28,000 students in Colorado would have met the requirements for the tax credit during the 2023-24 school year, according to data from the Colorado Department of Higher Education.

The tax credit is expected to cost $36.7 million in 2025-26, Bird said. In years the state collects tax dollars exceeding the cap set by the Taxpayers Bills of Rights, the credit would be paid out of that tax revenue. In years where the state comes in beneath the TABOR cap, the money would come from the general fund, Bird said.

If students receive scholarships or grants, the tax credit would only apply toward any gap left between those and full payment of tuition fees.

“The Colorado paradox”

The rate of Colorado high schoolers going to college was 49.9% in 2021, more than 10% lower than the national average, according to the U.S. Bureau of Labor Statistics. Twenty-nine percent of Colorado high school graduates enrolled in a college or university outside of the state, according to a 2023 report from the state higher education department — a 4% increase and the highest rate ever.

This is what experts refer to as “the Colorado paradox”: Colorado has the highest educational attainment levels of any state in the country with 62.9% of the population aged 25 to 64 having some form of a postsecondary credential, according to the state.

However, Colorado is far below the national average in getting its own residents to enroll in in-state postsecondary education, graduate and stay here.

“We want to grow our own and make sure our Colorado kids are prepared,” Paccione said.

Higher education has proven to provide graduates with not only better career and economic outcomes, but better health and quality of life, as well.

College graduates in the United States earn about $1 million more on average throughout their working years than people without postsecondary degrees, according to 2024 Gallup poll research . The average bachelor’s degree graduate will earn double what the average person without a degree earns in their lifetime, according to data from the U.S. Department of Health and Human Services .

College graduates report better health outcomes than those who only graduated high school, the Gallup research found, with 60% of people with bachelor’s degree describing their health as either “excellent” or “very good,” compared to 43% of respondents without a higher education.

“We want to make sure students see the value of going to college,” Paccione said. “This helps get them there.”

“A potential win” for students

Larry Pakowski is vice president for student engagement, inclusion and success at Aims Community College, which has multiple locations in northern Colorado. Pakowski said Aims anticipates the tax credit will impact middle-income families most since low-income students at Aims tend to have their costs covered by financial aid.

“For a ton of our students, the good news is their costs are already covered, but for those middle-income that don’t qualify for a Pell grant , that’s a potential win for them in terms of the affordability piece,” Pakowski said.

Nathan Cadena, chief impact officer at the nonprofit Denver Scholarship Foundation, which guides Denver students toward postsecondary degrees or certificates and supports them during their higher education journey, said any state investment in higher education is a positive step.

But he’s not sure how impactful this tax credit will be for the lower-income, first-generation college students that the scholarship fund often assists.

First, Cadena said explaining the mechanics of a retroactive tax credit to a family can be tricky messaging, not to mention that struggling families would still need to pay the tuition and fees upfront before getting their refund as part of the next year’s tax filing.

Then, he said, it’s important to recognize that taking care of tuition and fees obviously lightens the load of collegiate financial barriers, but costs like room and board, as well as books and supplies, are still big barriers to access.

“As a lifetime Coloradan, I’m thrilled anytime legislation passes in this direction, but it’s definitely complicated,” Cadena said. “At the heart of this is an explanation of a retroactive calculation of how only a portion of your cost was met. That’s the challenge. I don’t want to be too critical of it, but I do think we probably want to temper our expectations of what sort of impact this will have. It would be much different if it were upfront.”

The legislation has been in the works for about five years, Paccione said. In a University of Colorado news release, the flagship institution said the bill was CU-initiated.

“With this legislation, the state is making a significant investment to save many Coloradans money on college,” said Todd Saliman, CU president, in the release. “CU is committed to educating all Coloradans. That happens by working with policymakers to make a four-year degree accessible and affordable to all who want one, which in turn keeps our state and nation competitive.”

Leslie Taylor, vice president of marketing and enrollment for Western Colorado University in Gunnison, said there are entire segments of the population who don’t believe in the value of higher education, whether it’s a trade program, two-year college or four-year institution.

“A program like this just helps them see that higher education could be something for them,” Taylor said.

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Education credits: questions and answers
Q5. What are qualified tuition and related expenses for the education tax credits? A5. In general, qualified tuition and related expenses for the education tax credits include tuition and required fees for the enrollment or attendance at eligible post-secondary educational institutions (including colleges, universities and trade schools).
Tax Benefits for Education: Information Center
Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, if your modified adjusted gross income (MAGI) is less than $80,000 ($160,000 if filing a joint return), there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education.
The Lowdown on Education Tax Credits
The American Opportunity Tax Credit provides a credit of up to $2,500 per student enrolled in the first four years of higher education. Up to 40% of the American Opportunity Tax Credit (or $1,000) is refundable if you owe no taxes. The Lifetime Learning Credit provides a credit of up to $2,000 for payment of qualifying higher education expenses ...
Educational Tax Credits and Deductions You Can Claim for Tax Year 2023
The income limits are the same as they are for the American opportunity credit - to claim the full credit for tax year 2023, your MAGI must be $80,000 or less if you're filing as single or head ...
Education Tax Credits and Deductions
An education credit helps with the cost of higher education by reducing the amount of tax you owe on your return. The American Opportunity Tax Credit (AOTC) is a partially-refundable tax credit for college education where the student must attend at least half-time. The credit is available for the first four years of college education.
compare education credits
Only if student hasn't completed 4 years of post-secondary education before 2023: All years of post-secondary education and for courses to acquire or improve job skills: Number of tax years benefit available: 4 tax years per eligible student (includes any years former Hope credit claimed) Unlimited: Type of program required: Student must be ...
Understanding Taxes
Lifetime Learning Credit. Up to $2,500 credit per eligible student. Up to $2,000 credit per return. Available for first 4 years of postsecondary education, cannot be claimed more than 4 tax years. Available for all years of postsecondary education and for courses to acquire or improve job skills. Forty percent (40%) of credit may be refundable ...
American Opportunity Tax Credit and Other Education Tax Credits for
The American Opportunity Tax Credit and the Lifetime Learning Credit are federal tax credits that can lower your upcoming tax bill if you paid for college in 2023. You can claim these education ...
Qualified education expenses: What can you deduct?
Qualified education expenses primarily include tuition, but also costs that are required for you to enroll in a course or program. You will probably receive a copy of Form 1098-T from each school where you have eligible expenses. The tuition and fees deduction, available to all taxpayers, allows you to deduct up to $4,000.
Tax Credits For Higher Education
The credit is calculated in two parts and is equal to: 100% of the first $2,000 of eligible expenses. 25% of the next $2,000 in eligible expenses. This is a per-student limit. You can only claim it for the first four years of higher education. This credit is 40% refundable for most taxpayers. Lifetime Learning Credit.
Publication 970 (2023), Tax Benefits for Education
Business deduction for work-related education. Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2023, through December 31, 2023, is 65.5 cents a mile. See chapter 11.
IRS Form 8917: Full Guide to Understanding Tuition and Fees Deduction
IRS Form 8917 allows you to take a tuition and fee deduction on a qualifying post-secondary course. When you enroll into a post-secondary school course, the school will send you Form 1098-T. This form will allow you to file your tuition and fees deduction. You will only be allowed to deduct the amount stated on the Form 1098-T.
Education Tax Credits and Deductions
Eligible taxpayers (student, parent or spouse) can claim the credit for 100% of the first $2,000 spent on qualified education expenses (such as tuition, fees and textbooks). Eligible taxpayers can ...
5 Education Tax Credits and Deductions You Can Claim for 2022
The LLC is a tax credit of up to $2,000 per tax return and is available for unlimited years of post-secondary education. Education tax deductions can provide a dollar-for-dollar reduction of your taxable income and can be especially valuable for taxpayers who are not eligible for the education tax credits.
What Education Expenses Are Tax-Deductible in 2024?
But there's another tax break you might be able to claim. Enter the Lifetime Learning Credit. You can use it to pay for courses at a college, university, or trade school. The Lifetime Learning Credit is worth up to $2,000 per tax return. It comes with a gross income limit of $69,000 (or $138,000, if you file jointly).
Education Tax Credits & Deductions: Updated for 2023 & 2024
Credit Amount (for 2023 and 2024): up to $2,000 of the cost of tuition, fees and course materials paid during the taxable year per tax return. Tax credit can be received for 20% of the first $10,000 in eligible expenses. Income Limits & Phaseout (for 2023 and 2024): the credit starts phasing out at an increased MAGI of $80,000 ($160,000 for ...
Education Tax Deductions
Post-secondary institutions include colleges, universities, and other institutions offering education beyond high school. ... IRS Publications Related to Education Tax Deductions. The Internal Revenue Service (IRS) provides various publications and resources to help taxpayers understand and claim education tax deductions and credits. Key ...
Take Advantage of Two Education Tax Credits
The Lifetime Learning tax credit covers up to $2,000 of undergraduate and graduate school costs. The rules for the Lifetime Learning tax credit are unchanged from prior years. As before, the credit is: 20% of up to $10,000 of qualified education expenses. The maximum credit is $2,000 before any phase-outs.
Education Related Student Tax Credits to Claim on Your Tax Return
If your return is not the Free Basic Edition, use this student promo code for 50% off your tax return prep fees: 19edu50. There are two major education tax credits available to students to help offset the costs of higher education: The American Opportunity Credit and the Lifetime Learning Credit. These college tax credits may help save you ...
Eligible Educational Inst
An eligible educational institution is a school offering higher education beyond high school. It is any college, university, trade school, or other post-secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education. This includes most accredited public, nonprofit and privately-owned ...
11 Education Tax Credits and Deductions [2023 + 2024]
Fortunately, there's a full menu of education tax credits, deductions, and exemptions to help you pay common school-related expenses. ... These higher education expenses can be paid to any college, university, vocational school, or other post-secondary educational institution eligible to participate in federal student aid programs. 529 plans ...
The 'grandparent loophole' is putting much-needed money back ...
P ost-secondary education is an ... A 529 savings account is designed to help families save for a child's education. It's a tax-advantaged account that's typically opened by a parent (or ...
Saving for K-12 education with a 529 plan
It's important to note that tuition is currently the only qualified K-12 use for 529 funds. While the cost of books, computers and other school-related supplies are qualified for post-secondary students, those expenses don't receive the same tax-advantaged status for primary or secondary students.
Here's what taxpayers need to know about higher education tax credits
These credits reduce the amount of tax someone owes. If the credit reduces tax to less than zero, the taxpayer could even receive a refund. Taxpayers who pay for higher education in 2021 can see these tax savings when they file their tax return next year. If taxpayers, their spouses or their dependents take post-high school coursework, they may ...
Colorado to pay back 2 years of tuition for lower-income students
About 28,000 students in Colorado would have met the requirements for the tax credit during the 2023-24 school year, according to data from the Colorado Department of Higher Education. The tax ...
PDF Laws Governing the Employment of Minors (P882-English)
Deductions may not be made from the employee's wages for such costs. An employer that is not covered may provide insurance voluntarily. ... time federal tax credit of up to $2,400 (40% of the first $6,000 in wages). ... Secondary education programs of this type must be approved by the State Education Department. It is important that each ...

Educational Tax Credits and Deductions You Can Claim for Tax Year 2023

Key Takeaways

American Opportunity Credit for College Costs

Lifetime Learning Credit for Grad School and Continuing Education

Deduction for Student Loan Interest

Maximizing 529 Tax Breaks for Education at All Ages

It's Not Too Late to Start a 529 Plan

New 529 Options in 2024

Coordinating Tax Credits for Education With Tax-Free 529 Withdrawals

Answers to 15 Common Tax Questions

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Published: January 4, 2022 | Last Updated: October 24, 2023

What do I need to know?

Education Credits

Keep records of qualifying expenses you've paid

Be aware of common mistakes

What should I do?

How will this affect me?

Wait, I still need help.

Student Loan Interest Deduction

Work-related Education Business Deduction

MISCELLANEOUS: Educator Expense Deduction

Resources and Guidance

Publication 970,

Internal Revenue Manual (IRM)

Education Benefits – – No Double Benefits Allowed

Treasury Regulation §1.25A-1

Questions and Answers

American Opportunity and Lifetime Learning credits

Eligibility Tool

Did you know there is a Taxpayer Bill of Rights?

Related Content

Compare Education Credits

Tax Year 2023 Education Benefits Comparison

Education Benefits Resources

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American Opportunity Tax Credit and Other Education Tax Credits for 2023

What is the American Opportunity Tax Credit?

How the American Opportunity Tax Credit works

Who can claim the American Opportunity Tax Credit?

What the American Opportunity Credit is worth

Is the American Opportunity Tax Credit refundable?

What is the Lifetime Learning Credit?

How the Lifetime Learning Credit works

Who can claim the Lifetime Learning Credit?

Is the Lifetime Learning Credit refundable?

American Opportunity Tax Credit vs. Lifetime Learning Credit

Education tax forms

Tax Credits For Higher Education

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