Education Tax Deductions & Credits

by Frank Ellis

Education is the foundation of any society, and in the modern world, it’s the key that opens a whole world of opportunities. However, the costs of education have risen as with all other costs, and the government is trying to give back to people who invest in education. In the United States, taxpayers can get tax deductions and tax credits for education. Basically, education tax deductions reduce your total taxable income and education tax credits are reductions of your dollar for dollar tax bill. Let’s look at some of the education tax deductions and tax credits.

American Opportunity Tax Credit

To help parents and students pay for college expenses, the American Recovery and Reinvestment Act has introduced the American Opportunity Tax Credit. Initially, slated to end on December 31, 2010, this education tax credit has been extended by the Tax Relief and Job Creation of 2010. Right now, the American Opportunity Tax Credit will be available through December 2012. Married couples filing jointly with a modified adjusted gross income of up to $160,000 or individuals with modified AGI of up to $80,000 can apply for this tax credit. Instead of two years under the initial Hope Credit, the modifications allow taxpayers to claim the tax credit for up to four years of post-secondary education. Required course materials are to be included in the list of qualifying expenses. With the American Opportunity Tax Credit, eligible applicants can claim up to $2,500 for each student in a calendar year.

Lifetime Learning Education Credit

Any person who is taking a college class may qualify for the Lifetime Learning Education Credit. For the first $10,000 spent on college tuition and fees, you may receive a maximum tax credit of $2,000. The Lifetime Learning Education Credit is available for taxpayers who are responsible for their college expenses as well as the college expenses of their spouse and dependents. If you are enrolled in a recognized educational institution for even one class, you are eligible to apply for this tax credit.

Tuition & Fees Deduction

You may apply for tuition and fees tax deduction on qualified education expenses for your dependents, your spouse or yourself. To qualify for this deduction, you should be filing your tax returns as married filing jointly. If you are a dependent and another person can claim the deduction on his or her tax return, then, the deduction will not be available to you. To be used solely for higher education, the maximum amount of tuition and fees deduction is $4,000. For people whose income is too high for the Lifetime Learning Credit or the American Opportunity Tax Credit, the Tuition and Fees Deduction is a good option.

Student Loan Interest Deduction

For higher education student loans, you may qualify for a special tax deduction. To qualify, the modified AGI should be less than $145,000 for married couples filing jointly and less than $70,000 for individuals. In 2008, the Student Loan Interest Deduction can reduce your taxable income by up to $2,500.

This post was written by Frank Ellis

Frank Ellis enjoys life in Northern Michigan and is a freelance writer in the field of taxes and finance. You can learn more about education and student tax credits at

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