Tuition Tax Benefits

Note: the following information was adapted from the IRS website. For complete details on the following tax benefits, refer to the IRS Web site or consult your tax advisor.  

Hope / American Opportunity Credit and Lifetime Learning Credit

There are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the Hope / American Opportunity Credit and the Lifetime Learning Credit.  

Who can claim these credits?

Generally, you can claim these credits if all three of the following requirements are met:

• You pay qualified education expenses of higher education.
• You pay the education expenses for an eligible student.
• The eligible student is yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.

Can you claim both education credits this year?

If you are eligible to claim both the Hope / American Opportunity Credit and the Lifetime Learning Credit for the same student in the same year, you can choose to claim either credit, but not both.   If you pay qualified education expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. This means you can claim the Hope / American Opportunity Credit for one student and the Lifetime Learning Credit for another student in the same year.

Comparison of Education Credits

Hope / American Opportunity Credit

• For 2009 and 2010, up to $2,500 credit per eligible student. This credit is 100% of the first $2,000 and 25% for the next $2,000 paid for qualified tuition and related expenses including course materials.
  This tax credit is partially refundable for those who are eligible for more Hope / America Opportunity Credit than their tax liability.
• Available for tax filers with modified adjusted gross income (AGI) of $80,000 or less ($160,000 or less for joint filers). The credit is reduced if your AGI exceeds those limits, and is not available if your AGI is greater than $90,000 ($180,000 for joint filers).
• Available for the first four years of post-secondary education
• Student must be pursuing an undergraduate degree or other recognized education credential
• Student must be enrolled at least half -time for at least one academic period beginning during the year
• No felony drug conviction on student's record

Lifetime Learning Credit

• Up to $2,000 credit per return
  This is 20% of the first $10,000 for qualified tuition and related expenses
• Income limitations occur at a modified AGI of $58,000 for single tax filers and $116,000 for married filing jointly
• Available for all years of postsecondary education and for courses to acquire or improve job skills
• Student does not need to be pursuing a degree or other recognized education credential
• Available for one or more courses
• Felony drug conviction rule does not apply 

Required forms

• 1098-T (provided by the college)
• IRS Form 8863

Student Loan Interest Deduction

If your modified adjusted gross income is less than $70,000 ($145,000 if filing a joint return) there is a special deduction allowed for interest paid on a student loan.

The student loan interest deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040).  

Student Loan Interest Deduction at a Glance

Do not rely on this table alone. See the IRS Web site for complete details.

Maximum benefit

You can reduce your taxable income by up to $2,500.

Loan qualifications

Your student loan

• must have been taken out solely to pay qualified education expenses, and
• cannot be from a related person or made under a qualified employer plan.

Student qualifications

The student must be you, your spouse or your dependent

Time limit on deduction

You can deduct interest paid during the remaining period of your student loan.

Required forms

• 1098-E (provided by the lender)
• IRS Form 1040, line 33 or 1040A, line

Tuition and Fees Deduction

The tuition and fees deduction can reduce the amount of your taxable income by up to $4,000. This deduction may be beneficial if you cannot take either the Hope / American Opportunity or Lifetime Learning Credit because of income limitations. Income limitations occur at modified AGI of $80,000 for single tax filers and $160,000 for married filing jointly. For students in Midwestern disaster areas, the definition of qualified education expenses is expanded to include books, supplies, room and board.

Who can claim this deduction?

Generally, you can claim the tuition and fees deduction if all three of the following requirements are met:

• You pay qualified education expenses of higher education.
• You pay the education expenses for an eligible student.
• The eligible student is yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.

Required forms

• 1098-T (provided by the college)
• IRS Form 8917