Tax Credits for Students

College education tax deductions and credits

Education after high school is expensive and getting more expensive every year. The following tax credits could help you pay those bills and stay in school. Choose either the tuition deduction or one of the education tax credits, depending on what benefits you the most. Some students may be able to get a student loan interest deduction.

Tuition and fees tax deduction:

  • This deduction can reduce the amount of your income subject to tax by $4,000 or less.
  • You may be able to deduct qualified education expenses for yourself, your spouse or a dependent.
  • The education expenses must be for higher education (after high school). They include tuition and other required fees and expenses (activity fees, books, supplies, equipment). You can’t include personal expenses such as room and board.
  • You don’t have to file an itemized tax return to claim this deduction (unless you claim it as a business expense).
  • You can’t claim this deduction if (1) you’re also claiming one of the education tax credits (American Opportunity or Lifetime Learning) (2) you paid the expenses with a scholarship, grant, education savings account or employer or veteran education assistance, or (3) you or your spouse were a nonresident alien for part of 2014.
  • You can claim the credit if you make less than $80,000 and you’re single, or $160,000 if you’re married (and filing jointly).
  • To claim the tuition and fees deduction, complete Form 8917 with your tax return.

Learn more about the Tuition and Fees Deduction.

Education tax credits:

You can only claim one of the following credits in a single tax year for each person in your family. For example, you could claim one of the credits for your daughter and the other for yourself. You cannot claim the tuition and fees tax deduction in the same year that you claim one of the following credits. Choose the option that benefits you the most. (Please note that the Hope Credit is no longer available). Learn more about each education tax credit:

1. American Opportunity Credit

  • You can receive a credit of up to $2,500 per student.
  • It can only be used for the first four years of post-secondary education (after high school) for an undergraduate degree or other recognized education credential.
  • Up to $1,000 of the credit is refundable, so you can receive it even if you don’t owe taxes.
  • The student must be enrolled at least half time.
  • The credit can be used for tuition and fees, and course-related books, supplies and equipment.
  • You can claim the credit if you make less than $90,000 and you’re single, or $180,000 if you’re married (and filing jointly).

2. Lifetime Learning Credit

  • You can receive a credit of up to $2,000 per student.
  • It can be used for all years of post-secondary education (after high school) and for classes to improve job skills (non-degree programs are included).
  • The maximum credit is limited to the amount of tax you owe on your return.
  • The credit can be used for tuition and fees, and course-related books, supplies and equipment.
  • You can claim the credit if you make less than $60,000 and you’re single, or $120,000 if you’re married (and filing jointly).
You can choose whichever one of these credits or deductions will help you more, but you cannot use more than one for the same student in the same year.

Student Loan Interest Deduction

If you paid interest on a student loan and your income qualifies, you may be able to reduce the amount of your income subject to tax by up to $2,500.

You may be eligible to take the interest deduction if:

  • You, your spouse, or a person who was your dependent is a student who was enrolled at least half-time in a program.
  • The student loan was used for qualified and necessary expenses which include tuition and fees, room and board, books, supplies, equipment, or transportation.
  • You make less than $65,000 and you’re single, or $130,000 and you’re married (and filing jointly).
  • To claim the deduction, enter the allowed amount on your tax return as an adjustment to your income.

Find more information on the Student Loan Interest Deduction.

*Remember, the deadline to file your federal and state taxes is Wednesday, April 15, 2015.