Tuition and Fees Deductions: How to Qualify
Getting a tax break from the Internal Revenue Service on various college costs is a good deal for
U.S. students and their families.
After all, tuition, fees and other costs are rising yet again for the -NaN academic year.
According to data from U.S. News & World Report, average tuition and fee costs stand at:
- $41,426 for private colleges.
- $11,260 for state residents who attend public colleges and universities.
- $27,120 for out-of-state collegians attending state schools.
Is There a Tuition and Fees Deduction??
While there are several tax breaks for students and families who pay college costs, one of the
largest ones, the Tuition and Fees Deduction has expired and isn't allowable for the current tax year.
The deduction allowed taxpayers to deduct the cost of college tuition and any fees associated with
attending a college or university from their total taxable income. That covers plenty of costs for
U.S. families and the deduction may certainly arise again due to its popularity with voters who have
dependents attending college.
Education Tax Deductions
Outside of the tuition and fees tax break, there are several solid tax breaks you can take if
you're either a college student or the parents of a college student looking for a tax break or two
before filing with the IRS.
These college-related tax breaks lead the list:
Private School Tuition Discount
U.S. parents who are contributing to a college 529 savings plan in their home state can now use up to $10,000 annually to pay for private school tuition
for younger children.
You'll need to check with your state of residence if there are any limits that go above and beyond
what the federal government allows, but in general, you can spend the money from a 529 plan on
private school tuition and still replace the money with contributions on a 529 plan in a
Student Loan Interest Deduction
Most students and families likely qualify for the student loan interest deduction,
enabling them to curb some costs of student loan debt.
Take the deduction under the following scenarios:
- The taxpayer paid interest on a qualified (usually federal) student loan.
- You are mandated by law to pay interest on your student loan.
- Your tax filing status is not married, yet filing your returns separately from your spouse.
Your modified adjusted gross income is either less than $80,000 or less than $165,000, if filing
as a married couple. You can still file for the student loan deduction below these income amounts,
but your tax break is either reduced or taken out entirely in doing so.
It's also worth noting that you can't take the student loan tax deduction if you are on another
individual's tax return as a dependent (like a college student who is on her parent's tax return as
You'll also need IRS Form 1098-E from your college or university to file for the deduction if
you're a taxpayer (likely a college student or parent) who has paid over $600 in student loan
American Opportunity Credit
This tax credit was also set to expire at the end of 2017, but Congress has extended the American
Opportunity Tax Credit on a permanent basis.
This tax credit, much like the Hope Tax Credit that preceded it, allows the taxpayer to earn a tax
break for all four years of college (or any four years of post-secondary school education.) The Hope
Credit, which the new American Opportunity Credit is based upon, only allowed a tax break for two
years of college study.
Taxpayers are eligible for the American Opportunity Credit tax credit as long as the participating
college student is enrolled at least 50% of the time, on his or her way to a qualified degree or
certification program during the tax year in which the credit is claimed.
The tax credit limit is $2,500 paid out for typical college costs like tuition, administrative
fees, and textbooks, among other qualified costs. Claim the tax credit using IRS Form 8863, and make
sure to include the college or university's employer identification number when you complete your
Lifetime Learning Credit
This tax credit offers abundant deductions with one major caveat - you can't take both the Lifetime
Learning Credit and the American Opportunity Credit in the same year, for the same participating
You can, however, apply both tax credits for two different college students, which is highly
helpful in U.S. families with more than one collegian in the family.
Past that barrier, the Lifetime Learning Credit also allows for a tax credit for an unlimited
number of years in an accredited educational institution (as opposed to up to four years for the
American Opportunity Credit.)
Financially, the lifetime learning credit is non-refundable (meaning you can't claim the tax credit
if you don't owe any taxes), and offers a tax credit of up to $2,000 for the taxpayer. Claim the tax credit
using IRS Form 8863.
For the 2021 tax year, a taxpayer can claim the Lifetime Learning Credit if his or her modified
adjusted gross income stands at $69,000 for an individual taxpayer or $139,000 for a taxpayer filing
In future years, it's advisable to check that tax year's income eligibility before
taking the tax credit, as income qualification levels do change on a year-to-year basis.