A tax break is an option for students who are either saving for college, currently paying tuition, or dealing with student loan debt to help them with their tuition expenses.

Apart from using tax breaks to saving for college, while others help to pay for tuition and books while you’re a student, There are also tax breaks that help with student loan debt once your days in the classroom are over.

However, the rules can be tricky, and sometimes you can’t take advantage of one tax break if you already claimed another. So, it’s important to be up to date on all the rules all the time. The bottom line is that no matter where you are on your quest for knowledge, there’s probably a tax break that can help you.

• 10 Tax Breaks for Students to Lower Tuition Expenses
• Do you get a Tax Break on College Tuition?
• Can you Write off child’s School Tuition?
• What Can a College Student Write Off on Taxes?
• Can You Write Off Student Tuition?
• What Educational Expenses Are Tax Deductible?
• Can I Claim my Laptop as an Education Expense?
• Can I Claim my Daughter’s Tuition on my Taxes?
• What College Expenses Are Tax Deductible?
• Can I Deduct my Child’s College Tuition?
• Can I Deduct Tuition Expenses For my Child Who is Not a Dependent?
• Tuition and Fees Deduction
• What Educational Expenses Are Tax Deductible?
• How Can College Students Get More Tax Refund?
• How Much Money Can a College Student Make And Still be Claimed as a Dependent?
• How do I Know if I Qualify For Education Tax Credit?
• How do I Write Off Education Expenses?

10 Tax Breaks for Students to Lower Tuition Expenses

1. 529 Plans

Perhaps the best way for parents to save for a child’s college education is through a 529 savings plan. From the time a child is born to the time he or she goes off to college, parents can be socking away money in a 529 account for the child’s education and letting the funds grow tax-free for years.

Read Also: The 10 Best and Most Creative Ways to pay off Student Loans Faster

(Grandparents and others can set up 529 accounts for the child, too.) Plus, there’s no tax on withdrawals used for qualified college expenses, such as tuition, fees, room and board, books, computers, or internet access fees (withdrawals for room and board are tax-free only for students enrolled at least half-time).

Up to $10,000 from a 529 account can also be used to pay down the child’s student loan debt. And if your child ends up not going to college, tax-free rollovers to a 529 plan for another family member are allowed.

Many states also offer tax breaks for residents who put money into a 529 plan sponsored by the state. For example, you might get a state tax deduction for contributions to a plan. So, be sure to research your state’s rules before selecting a 529 plan.

Although they aren’t as popular as 529 savings plans, a few states also offer 529 plans that let you prepay college costs. The benefit of a prepaid 529 plan is that you lock in a set price for future expenses. One disadvantage is that prepaid plans typically only cover tuition and fees.

There are many 529 plan options out there. To find the one that’s best for you, check out savingforcollege.com.

2. 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.

However, unlike 529 plans, the tax code places limits on who can contribute to a Coverdell ESA, how much can be deposited into a Coverdell ESA each year, how long you can contribute to a Coverdell ESA, and how long you can leave money in a Coverdell ESA.

Single people can contribute to a Coverdell ESA only if they have a modified adjusted gross income (AGI) 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.)

Total contributions for each child in any year can’t be more than $2,000, no matter how many separate Coverdell ESAs have been established for him or her. Plus, parents or others might not be allowed to contribute the full $2,000 each year.

If a contributor’s modified AGI is between $95,000 and $110,000 (between $190,000 and $220,000 for joint filers), the $2,000 limit for each child is gradually reduced to zero for that person.

Contributions to a child’s Coverdell ESA aren’t allowed after the child turns 18 (except for special needs children). Money in a Coverdell ESA must also be distributed within 30 days after the child turns 30 (again, except for special needs children).

One of the main advantages Coverdell ESAs used to have over 529 plans was the ability to used Coverdell funds for primary and secondary school expenses. However, the 2017 tax reform law watered down that advantage.

Now, up to $10,000 per year can be taken out of a 529 plan to pay for kindergarten through 12th-grade tuition without having to pay federal taxes on the amount withdrawn.

3. American Opportunity Tax Credit

The American Opportunity tax credit is one of two credits available to people who are taking college courses now. However, it’s only available for expenses incurred by students who are in their first four years of undergraduate study.

So, if you’ve already claimed this credit (or the former Hope credit) for more than four years, you’re no longer eligible.

The student must also attend college at least half-time for an academic period that began in the tax year for which the credit is claimed. He or she must also be pursuing a program leading to a degree or other recognized education credential.

(Warning: If you claim the American Opportunity credit even though you’re not eligible, you’ll be banned from claiming it again for two years in the case of reckless or intentional disregard of the rules, or 10 years in the case of fraud.)

For purposes of the American Opportunity credit, qualified expenses include tuition and certain related expenses required for enrollment or attendance at the student’s college (e.g., necessary fees, books, supplies, and equipment).

Expenses that don’t count include amounts paid for the insurance; medical expenses (including student health fees); room and board; transportation; or similar personal, living or family expenses. This is true even if payment is a condition of enrollment or attendance.

You also can’t claim the credit for expenses for any class that involves sports, games, or hobbies, or any noncredit course, unless the course is part of the student’s degree program.

A parent, spouse or student who is not claimed as a dependent can claim the credit for 100% of the first $2,000 spent on qualified education expenses—tuition, fees and textbooks—and 25% of the next $2,000, for a total credit of $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.

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, and for single taxpayers with a modified AGI between $80,000 and $90,000.

There are a number of rules that prevent duplicate tax benefits. For example, you can’t:

• Deduct higher education expenses on your tax return (e.g., as a business expense) and also claim an American Opportunity credit based on the same expenses;
• Claim an American Opportunity Credit in the same year that you claim a tuition and fees deduction (see below) for the same student;
• Claim an American Opportunity credit for any student and use any of that student’s expenses in figuring the Lifetime Learning credit.
• Calculate the tax-free portion of a distribution from a 529 plan or Coverdell ESA using the same expenses you use to calculate the American Opportunity credit; or
• Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer

4. Lifetime Learning Tax Credit

The second tax credit for people currently enrolled in college is the Lifetime Learning credit. With this credit, you can claim 20% of the first $10,000 of out-of-pocket costs for college tuition, fees and books for a total maximum credit of $2,000.

Unlike the American Opportunity credit, the Lifetime Learning credit is not limited to undergraduate educational expenses, nor does the credit apply only to students attending at least half-time.

There’s also no limit on the number of years the Lifetime Learning credit can be claimed for each student. You can claim the credit for yourself, your spouse or your dependent for up to $2,000 per family each year.

For 2020 tax returns, you qualify for the benefit if your modified adjusted gross income is no higher than $138,000 for married couples filing jointly or $69,000 for single filers ($136,000 and $68,000, respectively, for 2019). Couples get the full 2019 credit at $118,000; singles at $59,000 ($119,000 and $58,000 for 2019).

Generally, the same types of education expenses that qualify (or don’t qualify) for the American Opportunity credit also qualify for the Lifetime Learning. However, you can also claim the Lifetime Learning expenses for classes taken to acquire or improve job skills.

The same rules that prevent duplicate tax benefits with regard to the American Opportunity credit also apply for purposes of the Lifetime Learning credit.

The Lifetime Learning credit is not refundable. As a result, it can reduce your tax to zero, but the excess won’t be refunded to you if the credit is more than your tax.

5. Tuition and Fees Deduction

The American Opportunity and Lifetime Learning credits are usually the best tax breaks to help pay for current college expenses. However, if you don’t qualify for those credits, you still might be able to claim a tax deduction for college tuition and fees for yourself, your spouse, or your dependents.

The deduction is an “above-the-line” deduction, which means that you don’t have to itemize to claim it. In addition to tuition, the deduction covers student fees and expenses for course-related books, supplies, and equipment if they are required to enroll or attend a class.

Insurance; medical expenses; room and board; transportation; and similar personal, living or family expenses aren’t deductible even if they’re mandatory for enrollment or attendance. Expenses for any class that involves sports, games, or hobbies, or any noncredit course, aren’t deductible either, unless the class is part of the student’s degree program.

The tuition and fees deduction is worth up to $4,000. You can get the full amount if your adjusted gross income is under $65,000 on a single return or under $130,000 if you file a joint return. For singles, the maximum write-off drops to $2,000 if your income is more than $65,000, and it disappears when income passes $80,000. For married couples, the max is $2,000 when income passes $130,000, and it’s wiped out completely if your AGI exceeds $160,000.

As with the American Opportunity and Lifetime Learning credits, the tax law doesn’t let you “double dip” if you’re claiming the tuition and fees deduction. So, for example, you can’t deduct tuition and fees if:

• You also deduct those expenses for another reason (e.g., as a business expense);
• You or anyone else claims an American Opportunity or Lifetime Learning credit for the same student in the same year;
• The expenses are used to figure the tax-free portion of 529 plan or Coverdell ESA distribution;
• The expenses are paid with tax-free interest on U.S. savings bonds; or
• The expenses are paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer.

The tuition and fees deduction expires after the 2020 tax year (although it very well could be extended…as it has several times before).

6. Scholarships, Fellowships, and Other Assistance

Many types of educational assistance are tax free if they meet certain requirements. For example, a scholarship or fellowship grant is excluded from taxable income if you’re a degree candidate at an eligible educational institution (including Pell grants and other need-based education grants).

The money must also be used for tuition or fees required for enrollment or attendance, or for books, supplies, equipment, or other expenses that are required for a class. It can’t exceed your education expenses; be designated or earmarked for non-educational purposes (e.g., travel or room and board); or represent payment for teaching, research, or other services required as a condition for receiving the financial assistance.

Payments to veteran for education, training, or subsistence under any law administered by the Department of Veterans Affairs are also tax free. However, if you qualify for other education tax benefits, you may have to reduce the amount of education expenses qualifying for other tax benefits by any VA payments that are used for education expenses.

(Note: An appointment to a U.S. military academy, such as West Point or the Naval Academy, isn’t a tax-free scholarship or fellowship grant. Payments received by a cadet or midshipman at a service academy are not tax-free, either.)

If your tuition is reduced because you or a relative works for a college, you might not have to pay tax on this benefit. (Although any tuition reduction received as payment for your services is taxable).

The rules for determining if a tuition reduction is tax-free are different if the education provided is at the undergraduate or graduate level. If you receive a tuition reduction for undergraduate courses, its tax-free only if you’re:

• An employee of the college;
• A former employee of the college who retired or left on disability;
• A widow(er) of someone who died while an employee of the college or who retired or left on disability; or
• The dependent child or spouse of someone described above.

For graduate courses, tuition reduction is tax-free only for students who perform teaching or research activities for the college or university.

7. Employer-Provided Educational Assistance

Workers who receive educational assistance benefits from their employer can exclude up to $5,250 of those benefits from their taxable income each year. The benefits must be paid under a written educational assistance program.

An employee can’t use any of the tax-free education expenses paid by their employer as the basis for any other deduction or credit, including the American Opportunity credit and Lifetime Learning credit.

Tax-free educational assistance benefits include payments for tuition, fees, books, supplies, and equipment. The payments don’t have to be for work-related courses or courses that are part of a degree program. Payment for the following are not tax exempt:

• 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 working condition fringe benefit is a benefit that, had you paid for it, would be allowable as a business expense deduction.)

8. Deduction for Self-Employed Person’s Work-Related Education

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. The education must be required to either:

• Keep your present salary, status, or job; or
• Maintain or improve skills needed in your present work.

However, no deduction is allowed if the education is:

• Needed to meet the minimum educational requirements of your present trade or business; or
• Part of a program that will qualify you for a new trade or business.

If the education meets the requirements above, the following expenses can be deducted:

• Tuition, books, supplies, lab fees, and similar items;
• Certain transportation and travel costs; and
• Other education expenses, such as costs of research and typing when writing a paper as part of an educational program.

You can’t deduct personal or capital expenses. For example, you can’t deduct the dollar value of vacation time or annual leave you take to attend classes.

You also can’t deduct a work-related education expense as a business expense if paid for them with tax-free scholarship, grant, or employer-provided educational assistance. You also can’t deduct them if you also benefit from the expenses under any other provision of the law.

9. Early Distributions from IRAs

As the name implies, individual retirement accounts (IRAs) are meant to be used in retirement. That’s why you generally have to pay a 10% tax if you take money out of an IRA before you reach age 59½ (in addition to income taxes on the amount withdrawn).

However, you can withdraw funds from an IRA to pay for qualified higher education expenses without having to pay the 10% additional tax (although you may still owe income tax on all or some of the amount distributed).

For the 10% penalty tax to be waived, the education expenses must be for:

• Yourself;
• Your spouse;
• Your or your spouse’s child, foster child, or adopted child; or
• Your or your spouse’s grandchild.

Allowable expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. For students attending on at least a half-time basis, room and board are qualified expenses, too.

10. Education Savings Bond Program

Do you have any old savings bonds that your grandmother gave you when you were a kid? If so, you might be able to cash them in without paying tax on the interest earned if you use the proceeds 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. They also have to be issued either in your name (as the sole owner) or in the name of both you and your spouse (as co-owners). In addition, the owner must be at least 24 years old before the bond’s issue date, which is printed on the front of the bond.

Tax-free treatment is available if the savings bond money is used for tuition and fees required for college enrollment or attendance contributions to a 529 plan, or contributions to a Coverdell ESA. It can’t be used for room and board, or for courses involving sports, games, or hobbies that aren’t part of a degree or certificate-granting program.

If you’re married and filing a joint return, the ability to claim this tax break on 2020 returns starts to phase out when adjusted gross income exceeds $123,550 and is completely phased out after $153,550 ($121,600 and $151,600, respectively, for 2019).

For singles and heads of households, the 2020 phase-out zone starts at $82,350 and is ends after $97,350 ($81,100 and $96,100 for 2019).

Do you get a Tax Break on College Tuition?

Americans can deduct qualified college tuition costs on their 2019 tax returns.

The college tuition and fees deduction was set to expire this year, but an 11th-hour spending bill signed by President Donald Trump on December 20 renewed the provision through 2020.

That means if you covered any of the costs of a degree program in which you, your spouse, or your dependent were — or are currently — enrolled, you could be eligible to reduce your taxable income by up to $4,000. The deduction is taken above-the-line, meaning you don’t have to itemize deductions to claim it. 

Your eligibility for claiming the tuition and fees deduction depends, in part, on your modified adjusted gross income (MAGI) and filing status.

Here’s how much the deduction is worth:

• $4,000, if your MAGI was less than $65,000 as a single filer or $130,000 as married filing jointly
• $2,000, if your MAGI was more than $65,000 but less than $80,000 as a single filer, or more than $130,000 but less than $160,000 as married filing jointly
• $0, if your MAGI was above $80,000 as a single filer or $160,000 as married filing jointly

Married couples filing separately are not eligible for the tuition and fees deduction.

Expenses covered under the deduction include anything related to coursework, including tuition, books, supplies, and equipment, that must be paid to the school as a condition of enrollment. Costs related to room and board, insurance, student health fees, transportation, or other personal living expenses are not eligible for the deduction.

If you maintain a 529 college savings plan and took distributions to pay for college expenses in 2019, you may still be able to claim the tuition and fees deduction, as long as the expenses you’re deducting were not paid for using those funds. Expenses that were paid for using a scholarship, grant, or employer assistance cannot be deducted.

You cannot claim the education-related tax credits, The American Opportunity Tax Credit and The Lifetime Learning Tax Credit, in conjunction with the tuition and fees deduction.

You’ll find more information about the qualified education expenses you paid for the year on Form 1098-T, which colleges and universities typically send to students by January 31 following the tax year.

Can you Write off child’s School Tuition?

A private school can be expensive. Whether your children are already in a private school or you’re considering it for the future, you’re probably looking for ways to save money. This section brings together the existing private school tuition tax credit and deduction programs from the federal government to the states and more.

Federal Tax Breaks

There is no simple federal tax credit or deduction for private K–12 educational expenses. Most of the federal education-related tax credits and deductions are geared toward higher education and career-furthering continuing education, but there are other federal programs, such as Coverdell Education Savings Accounts, that help parents save money on K–12 private schooling indirectly.

Coverdell Education Savings Account

Private school parents can take advantage of a Coverdell Education Savings Account to grow tax-free interest on their savings. Money contributed to a Coverdell account—up to $2,000 per year—grows with tax-free interest.

The money parents spend from these accounts, also known as distributions, isn’t taxed so long as it is used for the beneficiary’s expenses at a qualified educational institution, including private elementary and secondary schools and private or public universities.

Parents who know early on that they’ll send a child to private K–12 school can begin saving in a Coverdell. Because the interest is tax-free, this is a better option for saving for private school expenses than a regular savings or investment account, where accrued interest is taxed.

Coverdell ESAs have limitations on contributions and distributions, and may have problematic maintenance fees and other charges associated with them. Fees vary by Coverdell ESA provider, and may affect low-balance accounts more than high-balance accounts. Also, money saved in a Coverdell can also affect potential college financial aid.

State-Based Tax Breaks

Some websites will say you can’t get any tax breaks for sending your kids to private schools from kindergarten through 12th grade, but that’s not entirely accurate. Some states do offer families tax relief for K–12 private school expenses.

Alabama, Illinois, Indiana, Iowa, Louisiana, Minnesota, South Carolina and Wisconsin offer private school choice programs known as individual tax credits and deductions.

Each year, hundreds of thousands of taxpayers claim these state-based credits, and you could save anywhere from $100 to $10,000 based on your state’s programs. Exactly how much money you get back depends on where you live.

ALABAMA
Alabama Accountability Act of 2013 Parent-Taxpayer Refundable Tax Credits
Who Can Use It: Parents with children in schools classified as failing can apply when they transfer students to certain non-failing schools.
Average Value: $2,814. Worth lesser of 80 percent of annual state cost of attendance at K–12 or actual cost of children’s schooling.

ILLINOIS
Illinois Tax Credits for Educational Expenses
Who Can Use It: All taxpaying families with children who pay to send their kids to private school are eligible statewide. Homeschoolers can claim credit for qualified education expenses in excess of $250/year if they are the legal parent/guardian, parent and student were Illinois residents when expenses were paid, and student attended a school satisfying truancy law.
Average Value: $262. Allowed 25 percent of expenses after the first $250, but not to exceed $500 in a year.

INDIANA
Indiana Private School/Homeschool Deduction
Who Can Use It: Eligible child must be able to be claimed on parents’/guardians’ taxes and must be eligible to receive public K–12 education in an Indiana school corporation. Child must meet obligation for compulsory attendance.
Average Value: $1,804. Up to $1,000 per dependent can be claimed.

IOWA
Tuition and Textbook Tax Credit
Who Can Use It: All taxpaying families with children who pay to send their kids to private school are eligible statewide. Only the spouse claiming dependents can claim the credit.
Average Value: $130. Worth 25 percent of the first $1,000 paid for each dependent for tuition and textbooks.

LOUISIANA
Louisiana Elementary and Secondary School Tuition Deduction
Who Can Use It: All K–12 private school students in Louisiana are eligible.
Average Value: $5,448. Deduction is worth up to $5,000 per dependent. Parents can claim up to 100 percent of private school tuition paid per student per year.

MINNESOTA
Minnesota Education Deduction
Who Can Use It: Any parent or guardian who spends money on approved education expenses can receive the deduction. Qualifying child must attend school in MN, IA, ND, SD, or WI.
Average Value: $1,145. Tax deduction is worth 100 percent of the amount spent on education, up to $1,625 for grades K–6, $2,500 for grades 7–12.

Minnesota K–12 Education Credit
Who Can Use It: Credit is phased out for taxpayers earning more than $33,500. The maximum allowable credit is reduced for income over this amount, depending on family size.
Average Value: $254. Refundable tax credit available for 75 percent of the amount spent on educational expenses other than tuition, up to $1,000 per child.

SOUTH CAROLINA
South Carolina Refundable Educational Credit for Exceptional Needs Children
Who Can Use It: Parents of students designated by the Department of Education as a “child with a disability.” Students who have been diagnosed within the past three years of an acute or chronic condition that significantly impedes the student’s ability to succeed in school (ie. deafness, blindness, orthopedic disability, neurodevelopmental disability, etc.) also qualify. Parents must also believe the public school district does not meet the student’s needs, and student must attend an independent school.
Average Value: $6,211. Worth the lesser of (1) $11,000 per student or (2) their children’s actual cost of attending school.

WISCONSIN
Wisconsin K–12 Private School Tuition Deduction
Who Can Use It: Any Wisconsin taxpayer who pays private school tuition for their child is eligible for this deduction.
Average Value: $4,839. Deduction is worth up to $4,000 per child in grades K–8 and up to $10,000 per child in grades 9–12.

529 Plans for K–12 Expenses

Section 529 savings plans are state-based programs that have been around for decades to help families save for their children’s future college expenses, but the federal government recently changed the rules so these plans can be used for K–12 education, such as private school tuition.

The Tax Cuts and Jobs Act of 2017 allows parents to use up to $10,000 per year from a 529 account to cover private K–12 expenses. However, not all states have yet opted to follow the new federal rules for private K–12 expenses, so be sure you understand how different states’ rules work before making a withdrawal.

Here’s a quick overview of what you should know:

• You don’t have to live in a state to open a 529 account there, so many families shop around for the best plan.

• A 529 plan allows you to invest money tax-free as long as you use the withdrawals only for qualified expenses. In this way, it’s similar to a 401(k) or IRA, but it’s specifically for education. Paying no taxes on the interest you earn means the money can grow more quickly.

• On the federal level, qualified 529 plan withdrawals are free from income taxes or capital gains taxes. The actual savings you earn will depend on your tax bracket. People in higher tax brackets will see greater savings than those in lower tax brackets.

• The majority of states that have an income tax also offer income tax benefits on qualified 529 withdrawals. Rules vary state to state.

• Many states also offer in-state taxpayers incentives, in the form of credits or deductions, for contributing to a 529 account. Again, though, the rules vary from state to state.

Other

Private School Choice Programs

Before you pay for K–12 private school out of pocket, check to see whether your state has a private school choice program and whether your child would qualify.

Read Also: How to Achieve Financial Freedom as a Student?

These programs can provide families financial aid to send their kids to private schools from kindergarten through 12th grade via scholarships from nonprofits and/or state-supported vouchers or savings accounts. The funding available to families is usually much stronger than families can claim with simple tax credits and deductions.

Before- and After-School Care Deduction

The Child and Dependent Care Tax Credit makes it possible for families to get tax relief for their before-school and after-school care expenses. A family might qualify for this credit if their child attends a care program before or after school, so the parent(s) can work or look for work.

The IRS says that if your children are older than 13, they don’t require supervised care when you’re unavailable, so only parents of kids under 13 are eligible.

The credit applies to public and private programs, but you must separate the before- and after-school care payments from any private tuition payments. You might have to ask your private school to help with that.

The expense caps are $3,000 for one qualifying child or $6,000 for two or more qualifying children.

Can You Write Off School Tuition on Taxes?

Americans can deduct qualified college tuition costs on their 2020 tax returns.

The college tuition and fees deduction was set to expire in 2019, but an 11th-hour spending bill passed that December renewing the provision through the 2020 tax year.

That means if you covered any of the costs of a degree program for yourself, your spouse, or your dependent last year, you could be eligible to reduce your taxable income by up to $4,000. The deduction is taken above-the-line, meaning you don’t have to itemize deductions to claim it. 

Your eligibility for claiming the tuition and fees deduction depends, in part, on your modified adjusted gross income (MAGI) and filing status.

Here’s how much the deduction is worth:

• $4,000
  • If your MAGI was less than $65,000 as a single filer 
  • If your MAGI was less than $130,000 as a married joint filer
• $2,000
  • If your MAGI was between $65,000 and $80,000 as a single filer 
  • If your MAGI was between $130,000 and $160,000 as a married joint filer
• $0
  • If your MAGI was more than $80,000 as a single filer
  • If your MAGI was more than $160,000 as a married joint filer

Married couples filing separately are not eligible for the tuition and fees deduction.

What Can a College Student Write Off on Taxes?

There are a number of tax credits and deductions for students, as well as recent graduates and families with children in school. (A tax credit reduces the amount of income tax the IRS requires you to pay, while a deduction minimizes the amount of your income that is taxable.)

Take a look at these four tax credits and deductions to find out if you might qualify for a break on your education expenses.

1. American Opportunity Tax Credit

With the American Opportunity Tax Credit (AOTC), you can get an annual credit of $2,500 per eligible student for qualified education expenses, such as tuition. And if your tax liability is low and you do not owe the IRS, you can get up to 40 percent of the credit in cash refunded to you. That credit can mean an extra $1,000 in your bank account.

To be eligible, you or your dependent must currently be pursuing a degree and be enrolled at least half-time. You can only apply for the credit for four years, so if you take longer than that to complete your degree, you are no longer eligible.

To get the credit, your income must be $80,000 or less as an individual, or $160,000 for couples who are married and filing their taxes jointly. To claim AOTC, complete Form 8863 and attach it to your Form 1040 or 1040A.

2. Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is worth up to $2,000 and is for qualified educational expenses, such as tuition and fees. But the LLC credit is not refundable; if the credit brings your tax liability to zero, you will not get any money back, unlike the AOTC.

However, while the AOTC has a four-year maximum, there is no limit on how many years you can claim the LLC. If you take courses throughout your professional life, you can file for LLC.

To be eligible, you or your dependent must be enrolled in an approved educational university or college. You must be enrolled for at least one academic period, such as a semester, during the tax year.

To get the credit, your income cannot exceed $65,000 if you’re single or $131,000 if you’re married and filing jointly. Like AOTC, to claim the LLC, you must complete Form 8863.

3. Tuition And Fees Deduction

The tuition and fees deduction allows you to deduct up to $4,000 on your tax return, reducing your taxable income. But because it is a deduction and not a refundable credit, you do not get any of that money back if your tax liability is zero.

You can take the deduction if you are a student, spouse of a student, or if the student is your dependent. The expenses you deduct must be involved with higher education and cannot include living expenses like room and board.

To be eligible, you must make under $80,000 if you’re single or $160,000 if you are married and filing your taxes together. You can get the deduction even if you do not itemize your taxes.

4. Student Loan Interest Tax Deduction

If you are a student or a parent of a student and made payments on a qualifying student loan, you can deduct up to $2,500 of the interest you paid over the course of the year. And even if you made extra payments, you can deduct the extra interest you paid off.

To qualify, you or a dependent must have paid interest on a student loan in 2016. Your filing status must be single or married filing jointly; if you file your taxes as married filing separately, you are not eligible for this deduction.

Your income cannot exceed $80,000 if you’re single or $160,000 if you’re married. Loans that don’t qualify include loans offered by a relative or friend or employer-offered loans. You can use a student loan interest deduction calculator to see if you qualify for this tax break and for how much.

Can You Write Off Student Tuition?

The deduction for tuition and fees expired on December 31, 2020. The loss of this deduction also highlights how useful a 529 college savings plan can be for saving money on college expenses.

You can claim deductions on your 2020 taxes worth up to $4,000. You qualified for the tax break if you covered the cost of qualified education expenses for a college student such as yourself, one of your dependents (as long as no one else can claim him on their taxes) or your spouse.

Qualified education expenses include tuition and other fees that students are obligated to pay in order to attend a particular institution. But you can’t deduct expenses that you paid for with a scholarship or another tax-free award.

You’re ineligible for the tuition and fees deduction if you and your spouse are filing separate tax returns or you were a nonresident alien for part of the tax year. You can’t claim the tax break if your income is higher than a certain threshold either.

If your modified adjusted gross income is above $80,000 (or above $160,000 for joint filers), you can’t qualify for the deduction. Note also that this is an above-the-line deduction. That means you don’t have to itemize deductions in order to take advantage of it.

What Educational Expenses Are Tax Deductible?

Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student.

Who Must Pay

Qualified education expenses must be paid by:

• You or your spouse if you file a joint return,
• A student you claim as a dependent on your return, or
• A third party including relatives or friends.

Funds Used

You can claim an education credit for qualified education expenses paid by cash, check, credit or debit card or paid with money from a loan.
 

If you pay the expenses with money from a loan, you take the credit for the year you pay the expenses, not the year you get the loan or the year you repay the loan.

Qualified Education Expenses for Education Credits

Qualified expenses are amounts paid for tuition, fees and other related expense for an eligible student that are required for enrollment or attendance at an eligible educational institution. You must pay the expenses for an academic period* that starts during the tax year or the first three months of the next tax year.

Eligible expenses also include student activity fees you are required to pay to enroll or attend the school. For example, an activity fee that all students are required to pay to fund all on-campus student organizations and activities.

For AOTC only, expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school. For example, the cost of a required course book bought from an off-campus bookstore is a qualified education expense.

Expenses that Do Not Qualify

Even if you pay the following expenses to enroll or attend the school, the following are not qualified education expenses:

• Room and board
• Insurance
• Medical expenses (including student health fees)
• Transportation
• Similar personal, living or family expenses

Sports, games, hobbies or non-credit course

Expenses for sports, games, hobbies or non-credit courses do not qualify for the education credits or tuition and fees deduction, except when the course or activity is part of the student’s degree program. For the Lifetime Learning Credit only, these expenses qualify if the course helps the student acquire or improve job skills.

Can I Claim my Laptop as an Education Expense?

If you find yourself dreading tax season after a year of pounding out college reports on your computer, take heart—you may be able to get back the cost of that computer on your income taxes.

• The IRS publishes specific requirements for educational expenses and a computer often qualifies.
• If it doesn’t qualify under a tax credit, you still may be able to list it as an itemized deduction on your taxes.

Education tax credits

The government uses tax policy to encourage activities such as paying for education and saving for retirement. While the names and amounts vary, the IRS generally provides for some type of educational tax credit to help offset the costs of qualifying tuition and related expenses.

• A computer for school purposes may or may not qualify for these credits.
• Generally, if your computer is a necessary requirement for enrollment or attendance at an educational institution, the IRS deems it a qualifying expense.
• If you are using the computer simply out of convenience, it most likely does not qualify for a tax credit.

Itemized deductions

Itemized deductions are different from tax credits. While a tax credit will reduce your taxes on a dollar-for-dollar basis, a deduction reduces your taxable income instead. That means tax credits will lower your overall tax bill by a larger amount, but itemized deductions can still help.

• For tax years prior to 2018, if your computer does not qualify for any educational tax credits, you may be able to claim the expense as an itemized deduction instead.
• Beginning in 2018, these types of expenses are no longer eligible as an itemized deduction.

Educator expenses

If you are an educator using your computer for school purposes, take an itemized deduction for this expense. The IRS allows you to deduct a certain amount of unreimbursed educational expenses that can include computer equipment and software.

Can I Claim my Daughter’s Tuition on my Taxes?

If your child is pursuing a post-secondary education, you may be able to deduct his tuition from your taxes. This often arises because your child doesn’t have enough taxable income to claim the full tuition credit in the current tax year. The good news is the credit won’t go to waste – your child can elect to transfer the unused amount to you to reduce your tax bill.

The left over tuition deduction can be transferred to a parent.

Non-refundable Tax Credit

Similar to the basic personal amount, the tuition deduction is a non-refundable tax credit. A non-refundable tax credit reduces the amount of taxes payable to the government. While a refundable tax credit can generate a tax refund, a non-refundable tax credit can only reduce your taxes payable to zero.

In most cases, the unused portion of the non-refundable tax credit is forfeited, but in some cases (like the tuition deduction), it can be transferred to a parent, grandparent, spouse or common-law partner. For the student, it often makes sense to transfer the tuition deduction to someone who has sufficient income to make full use of the tax credit.

What College Expenses Are Tax Deductible?

Are College Books Tax Deductible?

Under the American Opportunity Credit, college books that are required for a class or other course of study are considered part of qualified education expenses. Books do not need to be purchased at the on-campus bookstore or via the college directly; where they’re acquired isn’t of interest. The main qualification is that the college textbooks need to be necessary to complete a class, lab, or field work.

Are College Tuition Grants Taxable?

If you’ve received a grant specifically to cover your college tuition, this is categorized within qualified education expenses and is not taxable.

Are College Scholarships Taxable?

Your college scholarships may be taxable, depending on what they cover. For example, if your college scholarships cover tuition, books, and other required fees, the IRS considers those qualifying education expenses and they won’t be taxed. But if your scholarships cover room and board, utilities, or non-required expenses, they will be taxed.

Are College Stipends Taxable?

Similar to scholarships, stipends may be taxed. For example, if you receive a financial aid package with a stipend (e.g., $10,000 with $5,000 allocated for research or teaching), the $5,000 portion for services rendered will be considered taxable income.

Are College Loans Tax Deductible?

If you’ve taken out a loan for yourself, your spouse, or a dependent to cover qualifying education expenses, you can take a tax deduction for any student loan interest paid. Loans can be federal or private and the maximum deduction is $2,500 per year.

Note, however, that the IRS is pretty strict about who can claim the student loan interest deduction. Taxpayers must have paid interest on a qualified student loan during the tax year you’re filing under, have been legally obligated to pay interest on the qualified student loan, not be “married filing separately”, not be claimed as a dependent on someone else’s tax return, and have a modified adjusted gross income of $65,000 or less ($135,000 for married filing jointly) for the maximum deduction.

(Taxpayers earning $80,000 or less or $160,000 for married filing jointly can claim a reduced deduction.) If even just one of those requirements doesn’t apply to you, you’re not eligible to claim the student loan interest tax deduction.

Are College Visits Tax Deductible?

While it would be nice for students to deduct the (often pricey) cost of travel and accommodations for campus tours, college visits are not tax deductible.

Are College Endowments Taxed?

Under the tax law passed at the end of 2017, universities and colleges with endowments larger than $250,000 per full-time student will now be subject to a 1.4 percent excise tax. If the university or college your student attends is now paying more in taxes each year, you may see that reflected in your annual tuition bill.

Speak to your college’s financial aid office if you’re concerned the higher tax obligations may trickle down to students and families in the form of fees and/or tuition hikes.

Can I Deduct my Child’s College Tuition?

To take advantage of the tuition and fees deduction, you must generally pay the fees and claim an exemption for the student. This can get messy when it comes to fees for your child, but the IRS boils it down pretty simply: if you claim the exemption for your kid, you can deduct the expenses that you pay, up to the $4,000 limit as of 2013.

If you don’t claim your child as a dependent, you’re flat out of luck. Or, if your child is the one paying the expenses, you can’t claim a deduction either.

Can I Deduct Tuition Expenses For my Child Who is Not a Dependent?

No. Whoever claims the student as a dependent is the only one who can claim expenses for the credits and deductions. You are not able to claim any education credits for a non-dependent child. To be able to claim education credit, the student in question must be a dependent claimed as an exemption on your tax return.

Tuition and Fees Deduction

The Tuition and Fees Deduction allows eligible taxpayers to deduct up to $4,000 from taxable income to help cover higher education costs for themselves, a spouse and dependent children.

The Tuition and Fees Deduction expired at the end of 2016 but was renewed for the 2017 tax year with the Bipartisan Budget Act of 2018. The Further Consolidated Appropriations Act, 2020 extended the expiration date for the Tuition and Fees Deduction to December 31, 2020.

The Tuition and Fees Deduction cannot be claimed during the same tax year that other education tax benefits, such as the American Opportunity Tax Credit (AOTC) or Lifetime Learning Tax Credit, are claimed for the same student.

Taxpayers who are eligible for more than one education tax benefit may choose to claim the Tuition and Fees Deduction because it will reduce their adjusted gross income. However, the AOTC generally provides a greater tax benefit for most individuals. 

Qualified expenses for the Tuition and Fees Deduction generally include tuition and fees required for enrollment or attendance at an eligible educational institution.

Taxpayers may not claim the Tuition and Fees Deduction for:

• Room and board and other living expenses
• Insurance
• Medical expenses
• Transportation
• Qualified education expenses paid for with tax-free earnings from 529 plan distributions, Coverdell Education Savings Account withdrawals and qualified U.S. Savings Bond Redemptions
• Qualified expenses paid for with tax-free scholarships 

In most cases, students receive an IRS Form 1098-T from the college or university that lists amounts paid for qualified expenses in a given tax year and the amounts billed during the year. Only the expenses paid during the year qualify for the Tuition and Fees Deduction.

What Educational Expenses Are Tax Deductible?

Qualified expenses for the Tuition and Fees Deduction generally include tuition and fees required for enrollment or attendance at an eligible educational institution.

Other qualified expenses include:

• Costs of required textbooks, supplies and equipment paid to the college or university
• Courses involving sports, games or hobbies, but only if they are part of the student’s degree program or helps the student improve or acquire job skills
• Qualified expenses purchased with student loan proceeds
• Qualified expenses paid in the current tax year for an academic period beginning within three months of the following tax year

How Can College Students Get More Tax Refund?

You might begin living on your own, get a part-time job, and make decisions for yourself that your parents used to make for you. Filing a tax return is one more rite of passage, and it doesn’t have to be a scary one.

In fact, filing a tax return could mean you’ll get money back. Here are five things you can do that may help you maximize a tax refund if you’re owed one.

1. Know your dependency status

Many of your education-related expenses could qualify you for a tax credit or deduction. But if you’re still listed as a dependent on your parents’ tax return, you may not be able to claim those tax breaks.

“Qualified education expenses paid by a dependent for whom the parent can claim an exemption, or by a third party for that dependent, are considered paid by the parent,” says Dr. Sandra Byrd, CPA and professor of accounting at Missouri State University.

Your parents can claim you as a dependent on their tax return if you’re a single full-time student younger than 24. But if you’re paying your own way through college, be sure to talk to your parents about not claiming you so that you can take advantage of tax breaks on your own tax return.

2. Apply for scholarships

Not only do scholarships provide you with free money to help pay for college costs, they’re also generally tax-free. That means they won’t be included as taxable income (unlike money you earn from a job) when it comes time to calculate your tax refund.

To see which scholarships you’re eligible for, check with your school’s financial aid office. Additionally, check out scholarship websites to search for opportunities through other organizations.

3. Get extra credit

Two federal tax credits are specifically designed for college students: The American opportunity tax credit and the lifetime learning credit.

“Students are normally only eligible for the AOTC during the first four years of college,” says Byrd.

If you qualify, you can get a credit of up to $2,500 — that’s 100% of the first $2,000 you spend in qualifying education expenses, and 25% of the next $2,000. Qualified expenses include the following:

• Tuition and fees
• Other required school expenses
• Books, supplies and equipment

If the AOTC helps get your tax liability down to zero, you can get 40% of the remaining credit in the form of a tax refund, up to $1,000.

With the lifetime learning credit, you can claim up to $2,000, or 20% of the first $10,000 you spent during the year in qualified education expenses.

“There is no limit on the number of years the lifetime learning credit can be claimed,” says Byrd.

The credit isn’t refundable, though, so it only helps cover any taxes that you owe. For students that expect a tax refund, this credit isn’t as helpful.

Keep in mind you can only claim these for yourself if a parent doesn’t claim you as a dependent on his or her tax return. Otherwise, your parent would get the credit. Don’t forget, you can only claim one of these two education credits in the same year.

Also, you must deduct tax-free financial assistance like grants and scholarships from your qualified education expenses — basically you can’t double-dip with the tax relief.

4. Make interest-only payments on your student loans

Unless the government subsidizes your student loans, they usually start accruing interest as soon as you or your school receives the loan money. That interest increases the amount you need to repay after you graduate.

What’s more, if you don’t pay any interest before the loan comes due, the interest may capitalize. That means the interest you still owe could get added to the principal amount you borrowed, and your interest going forward will be based on that new, higher amount.

But if you make interest-only payments, you can prevent the interest from capitalizing. Also, you can deduct that interest paid from your income on your tax return, up to $2,500 a year.

Again, this works only if a parent doesn’t claim you as a dependent, even if you were the one who made the payments.

5. Don’t pay to file your tax return

“Most college students have relatively simple tax returns,” says Mark Kantrowitz, publisher and vice president of strategy at Cappex.com, a website that helps students compare colleges and find scholarships.

If you’re filing either form, you probably don’t need to pay someone to do your return for you, Kantrowitz says. Instead, he recommends learning how to file it yourself or using a free online tax preparation service. With Credit Karma Tax®, filing your state and federal tax returns is always free.

If you’re not comfortable with filing on your own or you want to avoid mistakes, Byrd recommends seeing if there’s a Volunteer Income Tax Assistance program in your area that can prepare and file your taxes for free.

How Much Money Can a College Student Make And Still be Claimed as a Dependent?

You can usually claim your college student children as dependents. However, to claim a college student as a dependent, the child must:

• Be under age 19, or under age 24 and a full-time student for at least five months of the year
• Be younger than you, unless they are permanently and totally disabled
• Have lived with you for more than half the year. There are exceptions for temporary absences, such as when your child is away at school.
• Not provide more than half of their own support. Here are some guidelines:
  • Support includes expenses like:
    •  Food
    • Clothing
    • Lodging
    • Medical and dental (out of pocket)
    • Education
  • College student loans count as support by the person responsible for the loan repayment. Nontaxable scholarships don’t count here. 
  • As long as your child didn’t pay more than half of these expenses, you meet the support test. It’s not necessary that you paid these types of expenses, as long as your children didn’t.
• Not file a joint return unless:
  • They’re only filing to claim a refund of taxes
  • There would be no tax liability for either the child or the child’s spouse if they were filing separate returns
• Be one of the these:
  • U.S. citizen
  • U.S. resident
  • U.S. national
  • Resident of Canada or Mexico
• Be your:
  • Child
  • Stepchild
  • Foster child placed by a licensed agency
  • Sibling, step-sibling, or a descendent of any of these, like a niece or nephew

If your child meets all these criteria, you can claim your college student as a dependent.

If your child doesn’t meet these tests, your college student can still be your dependent if:

• You provide more than half of the child’s support.
• The child’s gross income (income that’s not exempt from tax) is less than $4,300.

If your child doesn’t live with you more than half the year, they might still qualify as a dependent college student under a different rule. In this case, the amount of your child’s income and the amount of support you provide is important.

How do I Know if I Qualify For Education Tax Credit?

The Lifetime Learning tax credit can help cover undergraduate costs for a student who is not eligible for the American Opportunity credit because they’re carrying a limited course load or already have four years of college credit. Additionally, the Lifetime Learning credit can also help cover the cost of graduate school and of courses taken to maintain or improve job skills.

You can claim the Lifetime Learning credit for qualified education expenses you pay for a dependent child as well as for yourself or your spouse.

• The maximum amount of covered expenses is $10,000 no matter how many students you have.
• This translates into a $2,000 maximum credit ($10,000 X 20%).

Qualified expenses include tuition and mandatory enrollment fees at an eligible institution. Books and course materials can also count, but only if you are required to purchase them directly from the school. Other expenses, such as optional fees and room and board, do not qualify.

Warning: You can’t claim both the American Opportunity credit and the Lifetime Learning credit for the same student for the same year. However, you can potentially claim the American Opportunity credit for one or more students and the Lifetime credit for up to $10,000 of qualified expenses for other students in your family.

How do I Write Off Education Expenses?

According to the IRS, in order for your education expenses to count as a write-off towards your taxable income, it might be to “maintain or improve your job skills.” In essence, that boils down to a couple of requirements:

Maintaining or improving skills for your business

Over time, there are updates to the tools, software, and process by which you provide your freelance services. To stay competitive in your field, you need to maintain your level of skill and improve on what you already offer. This can include paid training such as classes and self-study programs.

For example, if you paid for a class that walked through massive updates to software you use to provide design services, this could be considered maintaining your skills.

If the class is for another program you want to start using for your design work, it could be considered improving your skills by expanding what your business can offer. In either case, the IRS will recognize this as a deductible business expense.

Education required by law to maintain status

Some professions are required by law to complete continuing education requirements. You must follow these requirements to continue to provide the services in that field. 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 operate as a Real Estate Agent. Since this is required by law, the IRS will allow it as a deduction. Other professions that require continuing education to maintain their status are CPAs and Enrolled Agents.

Must relate to your current business

If you passed one of the two requirements listed above, you’re almost in the clear. The next requirement seems straightforward; the education must be related to your current trade or business and not qualify you for a new trade or business. For example, you can’t write off a writing class if you’re a delivery driver.

You can only deduct the education or academic period within the field you currently work. Also, let’s say a freelance web developer wants to take a sales class so they can better sell their services.

Even though this would improve their skills in “selling” their service and they have no intention of becoming a salesperson, the IRS may disallow this deduction. Why? Because their new sales skills could qualify them for a new business, regardless of their intention in taking the class.

No deductions to “Establish” your business

The IRS doesn’t allow a deduction for education expenses that help you meet the “minimum requirements” to offer your services.  However, the IRS does not specify what the “minimum requirements” of each trade or business are. Therefore the “ordinary and necessary” concept should be applied. 

For example, if you start a web developement business, a class on basic web design would likely not be deductible because web design knowledge would be considered a “minimum requirement” to operate your web design business.

When determining if the education would qualify as a “minimum requirement” to do business, ask yourself what the minimum requirements are to run your business.  In the above example, you would ask if it is an industry standard for freelance web developers to learn programming while offering web programming services. 

Although there may be some freelancers that are learning as they go, the IRS would not recognize this as ordinary and as such, the education expenses would not be deductible.

Tax credits may still apply even if there not business deductible

In a situation when you can’t deduct your education expenses as a business deduction, there are other non-business deductions you may be able to claim on your tax return: the Lifetime Learning Credit and the Tuition and Fees Deduction (as of this writing, the deduction is only available through 2020).

Aside from other requirements, your gross income (if filing single) cannot exceed $68,000 for the Lifetime Learning Credit and $80,000 for the Tuition and Fees Deduction. The maximum deduction for the lifetime learning credit is a $2,000 non-refundable credit and $4,000 for the tuition and fees deduction in a tax year.