College Education and Tax Deductions
If you, as a student, attend any accredited K-12 school, university, community college, trade or vocational school, or adult/continuing education class, you will generally qualify for one or several education tax credits or tax deductions. The degree you are pursuing should not affect whether you qualify or not (e.g. bachelor's degree, a master's degree, a certificate, or even a PhD for your post-secondary educational institution).
If you claim a student as a dependent on your tax return, note that you can claim only one type of education credit per student dependent on your federal tax return each tax year. If more than one student dependent qualifies for a credit in the same year, you can claim a different credit for each student. Utilize the eFile.com DEPENDucator or RELucator free tax tools to determine who qualifies as a dependent or use the CHILDucator tool for the Child Tax Credit.
The eFile.com Tax App makes it easy for you to claim education credits and tax deductions. Simply enter your education expenses and we will tell you which credit or deduction is best for you!
To figure the total tax credit or tax deduction amount for an eligible student, you may be able to include qualified expenses, such as tuition, fees, books, supplies, and other required course materials, but not room and board. These credits are subject to income limitations, so your amount may be reduced or eliminated based on your adjusted gross income, or AGI. When you prepare your return on eFile.com, simply enter the education expenses and the app will tell you which credit or deduction is best for you and will prepare the forms needed to claim the applicable deductions and credits on your return.
Important note: The Tuition and Fees Tax Deduction - the linked details provide more details below.
The Student Loan Interest Deduction is still in effect as is the American Opportunity Tax Credit and Lifetime Learning Credit. You can claim both the interest deduction plus a tax credit if you are actively paying off your student loans with interest while in school.
Expenses for Student Tax Deductions, Credits
Certain expenses may qualify you to claim tax savings on your next return; if you are the guardian of a student, you may be able to claim these if you pay for some or all of your dependent's education expenses.
Tuition and fees
Books and Supplies
Computers and related equipment and services (internet, document applications, etc.)
Student loan interest payments
Student Loan Interest Deduction
If you have started to pay back your student loans, you may be able to reduce your taxable income by up to $2,500 of the student loan interest you have paid for you, your spouse, or your dependent. This also includes the one-time "loan origination fee" charged by your lender.
The Student Loan Interest Deduction is an above-the-line deduction, which means that you do not need to itemize deductions in order to claim it. Above the line deductions reduce your taxable income and ultimately lower your adjusted gross income. To qualify for the deduction, the student loan on which you paid interest must be a commercial loan taken out exclusively for the purposes of paying for education. The loan may only apply to a student who is enrolled at least half-time in a degree program. The student must be you, your spouse, or your dependent.
There is a phaseout or income limit for those who can claim the Student Loan Interest Deduction, which is based on your adjusted income. In 2023, the deduction will be unavailable to you if your modified AGI is higher than $90,000 for single, head of household, and qualifying widow filers; the limit is $180,000 if Married Filing Jointly. The phaseouts are for an AGI of $75,000-$90,000 for most filers and $150,000-$180,000 for joint returns; when the upper limit is met, you are ineligible for the deduction. Married filing separately taxpayers are ineligible for the deduction as well as if you are claimed as a dependent on someone's return.
Qualified expenses for the Student Loan Interest Deduction are the total costs of attending an eligible educational institution (including graduate school). 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 the schooling institution or see if your school is listed here.
These costs include:
- Tuition and fees
- Books, equipment, and supplies
- Room and board
- Other necessary expenses, such as transportation.
Room and board costs only qualify for the deduction if they are not more than the greater of:
- The allowance for room and board (as determined by the eligible educational institution) that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, OR
- The actual amount charged if the student is residing in housing owned or operated by the educational institution.
Tuition and Fees Deduction
Important: The Tuition and Fees Tax Deduction was brought back by Congress in late 2019 for Tax Years 2018, 2019, and 2020. It was available for several years due to extensions that Congress had passed. However, beginning with 2021 and later tax returns, it has been repealed and thus is no longer available. The Lifetime Learning Credit amounts were increased and you can claim this on your next return. You will need to file a tax amendment and include Form 8917 to claim the Tuition and Fees tax deduction on your 2018, 2019, and 2020 Returns. If you still need to file these past returns, see prior year tax forms that you can fill out and mail in your 2018-2020 or any previous return.
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For your 2017 and earlier returns—plus for Tax Years 2018, 2019, and 2020—you can claim a tax deduction of up to $4,000 depending on your modified adjusted gross income or MAGI and filing status for qualifying tuition and fees you paid for you, your spouse, or a dependent. Note that you do not qualify if married filing separate. You can deduct any qualified expenses up to $4,000, even if you paid the tuition and fees with a loan. If you take the Tuition and Fees Deduction and you have also paid interest on student loans, you may be able to take the Student Loan Interest Deduction as well.
If you are filing a tax amendment to claim the Tuition and Fees Deduction on your 2020 or earlier return, here's how much the student tuition deduction might be worth:
- Worth $4,000, if your modified adjusted gross income (MAGI) was under $60,000 with the filing status of single or under $130,000 for married filing jointly couples.
- Worth $2,000 for single filers with a MAGI between $60,000 and $80,000, or the married filing jointly filing status with a MAGI between $130,000 and $160,000.
- Worth $0 tax deduction for single filers with a MAGI over $80,000, or over $160,000 for married filing jointly couples.
To qualify, the student for whom you paid tuition and fees must be you, your spouse, or your dependent. The student need only be enrolled part-time.
You will NOT qualify for the Tuition and Fees Deduction if any of the following are true:
How To Claim Education Deductions and Credits on eFile.com
During the tax interview and after you have indicated that you have education expenses, on the Education screen, there are a series of questions you will be asked. After you have provided the answers and information, the tax app will highlight for you which education credit you qualify for and is best for you—the American Opportunity Credit or the Lifetime Learning Credit. If you have student loan interest to claim, you can provide that information on the Student Loan Adjustment form.
How Else Can Students Save Money on Taxes?
Besides claiming tax credits (which reduce the amount of income tax you owe) and tax deductions (which reduce the amount of your income that is taxable), there are two other major ways students can save money on taxes:
- Exclusions: Tax exclusions are parts of your income that do not have to be included in your gross income on your tax return. The most relevant forms of non-taxable income for students are scholarship funds and fellowship grants. Learn more about excluding scholarship and grant income.
- Savings Plans: There are two special kinds of savings accounts which provide great tax benefits to students: Coverdell Educational Savings Accounts (Coverdell ESA's) and Qualified Tuition Programs, which are also known as 529 College Savings Plans.
- Financial Aid: When applying for financial aid, generally via the FAFSA (Free Application for Federal Student Aid), your college or university may ask you to provide old tax returns—either yours or your parents. If you filed your previous tax returns on eFile.com, the previous 3 years' returns will be in your account. If you need a copy of a return that is prior to the last 3 years, contact us. If you did not file your previous tax return on eFile.com, you might need to obtain a copy or free transcript of a tax return from the IRS. A transcript of your tax return provides W-2 information along with the basic information that was filed with the tax return, including marital status, adjusted gross income, taxable income, and most line items from the tax return. The tax return transcript can be sent directly to the institution asking for it.
Review other tax savings for all taxpayers, including students.
College Student Tax Credits
Education Savings Plans for College and K-12 Students
Related Student Tax Topics
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