01/05/2024
Educational Tax Credit
Tax benefits exist in the form of credits and deductions for those paying for higher education. We encourage students and their families to take advantage of such benefits offered in an effort to reduce the cost burden of college. Please read below and explore the links provided for more information.
Please note: Not all students or expenses are eligible for education tax benefits
CREDITS
An education credit helps with the cost of higher education by reducing the amount of tax owed on a tax return. If the credit reduces the taxes owed to less than zero, students and families may get a tax refund. There are two education credits available: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit.
WHO CAN CLAIM AN EDUCATION CREDIT?
There are additional rules for each credit, but those seeking to claim them must meet all three of the following requirements for either credit:
Individual, their dependent or a third-party pays qualified education expenses for higher education.
An eligible student must be enrolled at an eligible educational institution.
The eligible student is the individual, their spouse or a dependent they list on their tax return.
If a student is eligible to claim the Lifetime Learning Credit and also eligible to claim the American Opportunity Tax Credit, individuals and families can choose to claim either credit, but not both.
The AOTC may not be claimed if a student was a nonresident alien for any part of the tax year unless they elect to be treated as a resident alien for federal tax purposes. For more information about AOTC and foreign students, visit American Opportunity Tax Credit - Information for Foreign Students.
DEDUCTIONS
Deductions reduce the amount of income that is subject to tax, thus generally reducing the amount of tax that must be paid. There are several education deductions available including those related to tuition and fees as well as student loan interest paid. For more information, visit the IRS Tax Benefits for Education Information Center.
1098-T FORM
A 1098-T is provided to undergraduate students by the beginning of February provided the student was enrolled at any time in the previous calendar year. Students not part of an undergraduate program, such as Continuing Education or Adult Education, do not receive a 1098-T.
