Category: Education: Tax Breaks Related to School
Tax Benefits for Education
New: Tuition and fees deduction expired for 2017 tax year. Added back by the Bipartisan Act in February 2018 retroactively.
Whether you are paying for a college education or a teacher buying items for your classroom, education credits and deductions can help lower your tax bill.
The American Opportunity Credit, Lifetime Learning Credit or the Tuition and Fees Deduction may help offset the cost of higher education for you, your spouse and your dependents.
The amount of these credits and deductions are based on the qualified education expenses, such as college or vocational school tuition and enrollment fees, that you paid during the year and may be limited by your modified adjusted gross income. Room and board, insurance or personal living expenses are not considered qualified education expenses.
The American Opportunity Tax Credit, which expanded and renamed the already-existing Hope credit, can be claimed for tuition and certain fees you pay for higher education in 2017. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act extended the American Opportunity Tax Credit through 2018.
The Lifetime Learning Credit, which is up to a $2,000 tax credit per tax return, applies to undergraduate, graduate and professional degree courses and there is no limit to the number of years you can take this credit.
The Tuition and Fees Deduction- which is up to a $4,000 deduction from your income, applies to undergraduate, graduate and professional degree courses. This deduction may be beneficial as the modified adjusted gross income limits are higher than the thresholds for the American Opportunity Tax and Lifetime Learning Credits.
Are you paying Student Loan interest? You may be able to deduct up to $2,500 from your income per tax return. Student Loan interest may be deducted even while your student is in school if you are paying the interest immediately rather than deferring the payments.
You cannot claim the American Opportunity Tax Credit, Lifetime Learning Credit and the Tuition and Fees Deduction for the same student in the same year. You will want to choose the credit or deduction that provides the greatest benefit. However, you can claim the Student Interest Loan deduction and one of these other benefits simultaneously.
Students and parents of students are not the only ones who can claim a Back-to-School tax benefit.
As summer comes to an end, many teachers and other eligible educators are preparing for the start of the new school year. That preparation could include purchasing items for the classroom from personal funds. Be sure to keep your receipts. These out-of-pocket classroom expenses can be deductible.
As an educator, you may be able to deduct up to $250 for expenses paid for the purchase of books, computer equipment and classroom supplies. If you and your spouse are filing a joint return and both are eligible educators, the maximum deduction is $500.
To find out more about the deduction for educator expenses, including who qualifies for this deduction, please click here.
Additional information on the American Opportunity and Lifetime Learning Credits, Tuition and Fees Deduction and Student Loan Interest Deduction is available in Publication 970: Tax Benefits for Education.
What Higher Education Expenses Can I Use to Reduce My Taxes?
Reporting Educational Expenses as Credits or Tuition and Fees?
Explaining Education Deductions and Credits
What are Qualifying Education Expenses?
Education Credit- Form 8863