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Tax Deductions: Is College Tuition Tax Deductible?

Going to college seems to get more expensive every year. Tuition, fees, room and board for an in-state student attending a four-year public institution cost $20,092 for the 2016-2017 school year (on average). A decade ago, an in-state student would’ve paid an average of $15,180 (in 2016 dollars) for the same expenses. There’s not much you can do about rising college costs, but there are a few tax breaks you can use to help offset the cost of college.

The Tuition and Fees Deduction

The deduction for tuition and fees is not available for the 2018 tax year. Those are the taxes you file in early 2019. The loss of this deduction also highlights how useful a 529 college savings plan can be for saving money on college expenses.

If you need to file a return for your 2017 taxes, you can claim the deduction, which is 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.

Tax Credits for College Students 

Tax Deductions: Is College Tuition Tax Deductible?

There are two additional tax breaks that students in college (or their parents and guardians) might benefit from: the American Opportunity Tax Credit and the Lifetime Learning Credit. The former tax break allows parents (and students who aren’t considered dependents) to reduce their tax bill by up to $2,500 for up to four years. Since it’s a refundable tax credit, it can increase the size of your tax refund even if it reduces your tax liability to a negative number.

Independent students and parents can qualify for the American Opportunity Tax Credit if they paid for qualified education expenses used for undergraduate courses. But the amount you’re allowed to claim depends on your modified adjusted gross income (MAGI). In order to get the full $2,500 credit, your MAGI cannot be higher than $90,000 (or over $180,000 if you’re filing a joint tax return.

Since the Lifetime Learning Credit is a nonrefundable tax credit (meaning that you can’t get a refund if the credit lowers your tax liability to an amount below zero), you’re better off claiming the American Opportunity Tax Credit. Still, the Lifetime Learning Credit is helpful because parents and students can claim the credit if they’re paying for an undergraduate education, graduate school or technical school. Plus, there’s no rule saying that it can only be claimed for a certain number of years.

To get the full $2,000 Lifetime Learning Credit, your MAGI can’t be higher than $56,000 if you’re single or $112,000 if you’re filing a joint tax return. You’re ineligible for the tax credit if your filing status is married filing separately, you were a nonresident alien at some point during the year and/or someone else is claiming you (or the student you paid for) as a dependent.

The Student Loan Interest Deduction 

One useful tax break for college graduates and their parents is the student loan interest deduction. For your 2018 taxes, this deduction is worth the amount you paid in interest for your student loans, up to $2,500, which is the maximum deduction.

In order to qualify for the deduction, you must meet the following criteria:

  • You paid interest, in 2018, on a qualified student loan.
  • You’re using any filing status except married filing separately.
  • Your modified adjusted gross income (AGI) is less than $80,000 if you file single, head of household or as a qualifying widow(er). Your AGI is less than $165,000 if you’re filing a joint return.
  • No one else is claiming you (or your spouse if you’re filing a joint return) as a dependent on their tax returns.

For a student loan to qualify for the deduction, you must have used the loan to pay higher education expenses for yourself or for one of your dependents (with only a couple of exceptions).

To calculate your exact deduction, you can use the Student Loan Interest Deduction Worksheet that the IRS provides.

Bottom Line

Tax Deductions: Is College Tuition Tax Deductible?

The deduction for college tuition and fees is no longer available. However, you can still help yourself with college expenses through other deductions, such as the American Opportunity Tax Credit and the Lifetime Learning Credit. College graduates can also deduct the interest that they pay on student loans. The interest deduction does not require you to itemize your taxes. (The tax filing service H&R Block actually provides the necessary forms for this deduction with their free filing option.) Beyond these credits, it’s very useful to have a 529 college savings plan to help decrease your out-of-pocket costs.

Update: If you have further financial questions, SmartAsset can help. So many people reached out to us looking for tax and long-term financial planning help, we started our own matching service to help you find a financial advisor. The financial advisor matching tool can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and your goals. Then the program will narrow down your options to three who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

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Amanda Dixon Amanda Dixon is a personal finance writer and editor with an expertise in taxes and banking. She studied journalism and sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Huffington Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.
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