Is College Tuition Tax-Deductible? Learn What You Can Claim

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College tuition continues to rise, and students and their parents are looking for ways to save wherever they can. While college tuition is not tax-deductible, there are other ways to reduce your tax burden if you’re paying for higher education.

College Tuition and Taxes: At a Glance

• College tuition is not tax-deductible, but education tax credits can reduce what you owe.
• The American Opportunity Tax Credit (AOTC) offers up to $2,500 per student for eligible undergraduates.
• The Lifetime Learning Credit (LLC) provides up to $2,000 per tax return for undergraduate, graduate or job-related courses.
• Only certain expenses qualify, such as tuition and required fees.
• Parents or students can claim credits, depending on dependency status.
• Other tax breaks, such as 529 plans and the student loan interest deduction, can also help offset college costs.

Why College Tuition Isn’t Tax-Deductible Anymore

The Internal Revenue Service (IRS) tuition and fees deduction was eliminated after tax year 2020. This deduction allowed those who earned less than $80,000 — or $160,000 if married filing jointly — to deduct up to $4,000 in tuition and fees from their taxable income.

This deduction was eliminated in 2021 and was replaced with increased education tax credits.

What You Can Claim Instead: Education Tax Credits

Students or parents who are paying for college can now take advantage of two tax credits to reduce the cost of college. A tax credit reduces the amount of tax you owe or may even result in a refund.

AOTC vs. LLC: Quick Guide

American Opportunity Tax Credit

The AOTC covers tuition, some fees and course materials, but not room and board.

The AOTC is $2,500 each year for up to four years. The income tax you pay is reduced by up to $2,500 by the credit. If you don’t owe that much, up to 40% of the credit ($1,000) can be refunded to you.

The AOTC can be claimed if the student:

• Was enrolled at least half-time for at least one academic period during the tax year
• Is enrolled in a program that leads to a degree, certificate or credential
• Has not completed four years of post-secondary education as of the start of the tax year
• Has not claimed the AOTC for more than 4 years
• Has not been convicted of a federal or state felony drug offense

The credit can be claimed on the tax return of the person who is paying the tuition, which may be the parent(s), or the student if they are not a dependent of someone else. To qualify for the full credit, the filer’s modified adjusted gross income (MAGI) must be less than:

• $80,000 for single filers
• $160,000 for filers who are married filing jointly

Single filers who earn between $80,000 and $90,000, and married filing jointly filers who earn between $160,000 and $180,000 qualify for a reduced amount.

Lifetime Learning Credit  

The LLC is a tax credit of up to $2,000 for eligible students enrolled in eligible undergraduate, graduate and professional degree courses.

The credit covers 20% of the first $10,000 of qualified expenses, which include tuition, enrollment fees, books and supplies that are paid directly to the school.

Students are eligible for the LLC for all years of any postsecondary education and for courses taken to improve or acquire job skills, provided the educational institution is eligible. The student must be enrolled for at least one academic period beginning in the tax year.

The same income limits apply to the LLC as to the AOTC — your MAGI must be less than:

• $90,000 if you are a single filer
• $180,000 if you are married filing jointly

Income Limits for Education Tax Credits 

To qualify for either the AOTC or the LLC, your MAGI must be less than $90,000 for a single filer, or $180,000 for a married couple filing jointly.

To receive the full amount of a credit, your income must be less than $80,000 for single filers or $160,000 for those married and filing jointly.

The credits are gradually reduced between these two amounts.

Which College Expenses Actually Qualify?

Not all educational expenses qualify for tax credits. Both the AOTC and the LLC consider tuition and enrollment fees to be qualified educational expenses.

Books, supplies, and equipment are considered qualified educational expenses for the AOTC, but they are only considered qualified for the LLC if they are required to be paid directly to the school.

For example, if a college requires that a student purchase a computer, but they do not have to buy it directly from the school, it would qualify for the AOTC but not the LLC.

Expenses need to be paid during the tax year for which you are claiming the credit, or in the first three months of the next tax year.

Qualified Education Expenses

Only certain expenses qualify for these tax credits. They are:

• Tuition
• Enrollment fees
• Activity fees
• Books, supplies and equipment — must be purchased from the school for LLC

Expenses That Don’t Qualify

These expenses don’t qualify for tax credits, so don’t include them when you’re calculating your costs:

• Room and board
• Insurance
• Medical expenses
• Transportation
• Other living expenses
• Expenses for sports or hobbies, unless required for the student’s degree program — AOTC only

How To Claim Education Tax Credits: Step by Step

To claim the AOTC or the LLC, follow these steps.

1. Use the IRS’s Interactive Tax Assistant to determine if you’re eligible, and for which education credit.
2. Keep a record of the qualified education expenses you pay. These include tuition, fees and, in some cases, supplies, books and equipment.
3. When you file your income tax return, include IRS Form 8863 and all supporting documentation.

Education Tax Breaks for Parents vs. Students

Both the AOTC and the LLC are available to parents if their student is a dependent they claim on their taxes. They are also available to students if they cannot be claimed as a dependent on their parents’ income tax return.

Other Tax Breaks That Can Help With College Costs

There are other ways that college costs can be offset with tax breaks.

529 College Savings Plans

A 529 college savings plan is an investment account that a parent or other adult can open for the benefit of a child. Here are some key points to know:

• After-tax contributions are made to the plan and invested.
• When the child goes to college, the money can be withdrawn to pay for qualified educational expenses.
• The tax advantage here is that withdrawals are not taxed, so any gain that the investments earn in the account is tax-free.
• Each state offers its own 529 plan and some plans have state tax advantages.
• There are limits to the amount of money that can be contributed to a 529 plan, and restrictions on what you can do with the funds if a child does not attend college.

Student Loan Interest Deduction  

If you paid interest on a student loan, you can deduct up to $2,500, or the amount of interest you paid, whichever is lower. Keep these points in mind:

• If your MAGI is less than $80,000 for a single filer or $160,000 for a married couple filing jointly, you are eligible for this deduction.
• It’s phased out for single filers whose MAGI is between $80,000 and $95,000, and for joint filers with MAGI between $160,000 and $195,000.

Common Tax Mistakes To Avoid  

Avoid these common mistakes when applying for an education tax credit.

• Claiming credits for an ineligible student
• Claiming expenses you didn’t pay out of pocket
• Including non-qualified expenses like room and board
• Claiming the AOTC for more than four years
• Using expenses paid outside the tax year
• Skipping the IRS eligibility check

Key Takeaways

• You can offset the high cost of post-secondary education with education tax credits.
• Make sure you select the correct credit you or your student is qualified for.
• Understand the income requirements to qualify for education tax credits.

Michael Keenan and Jacob Wade contributed to the reporting for this article.

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