Paying for college, university, or vocational school can be expensive, but several education-related tax benefits may help reduce your tax bill. You may be able to claim certain deductions or education credits for qualified expenses you paid for yourself, your spouse, or a dependent listed on your tax return.
Which Schools Qualify?
Generally, education expenses qualify if they were paid to an eligible educational institution that participates in a student aid program administered by the U.S. Department of Education. This includes most accredited colleges, universities, and post-secondary vocational schools.
You can verify whether a school qualifies by checking the Department of Education's Database of Accredited Postsecondary Institutions and Programs (DAPIP).
Do I Need Form 1098-T?
In most cases, you'll need Form 1098-T, Tuition Statement, from the educational institution to claim an education credit. The form reports qualified tuition and related expenses paid during the tax year and helps determine your eligibility for education benefits.
Education Tax Credits
Two common education credits may be available:
American Opportunity Credit (AOC)
The American Opportunity Credit is generally available for eligible students pursuing a degree or recognized credential during their first four years of higher education. This credit can be worth up to $2,500 per eligible student, subject to income and eligibility requirements.
Lifetime Learning Credit (LLC)
The Lifetime Learning Credit may be available for undergraduate, graduate, and professional degree courses, as well as courses taken to improve job skills. Unlike the AOC, there is no limit on the number of years you can claim the LLC, provided you meet the eligibility requirements.
Only one education credit can be claimed per student for the same tax year.
Student Loan Interest Deduction
If you're repaying student loans, you may be able to deduct qualified student loan interest paid during the tax year. This deduction is available even if you don't itemize deductions.
Generally, you can claim the deduction if all of the following apply:
- You paid interest on a qualified student loan during the tax year.
- You are legally obligated to pay the interest.
- Your filing status is not Married Filing Separately.
- Your modified adjusted gross income (MAGI) is below the annual IRS limits.
- You and your spouse, if filing jointly, cannot be claimed as dependents on another person's return.
If you paid $600 or more in interest during the year, your loan servicer will generally issue Form 1098-E, Student Loan Interest Statement. The deductible amount is usually reported in Box 1.
How Do I Report Student Loan Interest in the Software?
To enter your student loan interest deduction:
- Select Federal.
- Choose Deductions (Select My Forms).
- Select Adjustments to Income.
- Choose Student Loan Interest Deduction.
- Enter the information from Form 1098-E.
Keep in Mind
Education tax benefits often have income limits, enrollment requirements, and restrictions on which expenses qualify. If you received scholarships, grants, employer educational assistance, or distributions from a 529 plan, those amounts may affect the credit or deduction you can claim.
Review your tax documents carefully and keep records of tuition payments, course materials, and student loan interest to ensure you're claiming all the education benefits for which you qualify.