Back to School Season: Education Tax Deductions and Credits
Tax deductions and credits that can help alleviate the financial burden of getting an education. As many taxpayers and their families go back to school, we’re here to explain some of the key education tax benefits you should consider to maximize your savings.
1. The American Opportunity Tax Credit (AOTC):
This credit is designed to help offset the cost of the first four years of qualified higher education expenses. Eligible students must be enrolled at least half-time in a qualifying program, with some income limits applying. Taxpayers can save up to $2,500 per eligible student, with 40% of the credit being refundable (meaning you could get money back even if you don't owe taxes). Qualifying expenses include tuition, fees, course materials (books, supplies, etc.). Learn more here.
2. The Lifetime Learning Credit (LLC):
This Lifetime Learning Credit can be claimed for an unlimited number of years for qualified tuition and fees for undergraduate, graduate, or professional courses. Students taking courses to improve job skills or to acquire a degree may also be eligible, with income limits applying. Taxpayers can save up to $2,000 per tax return (not per student). Qualifying expenses are tuition and fees only. Learn more here.
3. Student Loan Interest Deduction:
This is a deduction for interest paid on qualified student loans. Borrowers who paid interest on a qualified student loan, with income limits applying, can qualify for this deduction. Taxpayers can save up to $2,500 in interest. Learn more here.
Education tax benefits can make a significant difference in your finances. By taking advantage of these deductions and credits, you can offset the cost of education and invest in your future. Make sure to keep records of all educational expenses including tuition statements, receipts for supplies purchased, and any other costs associated with education. If you're unsure which credits or deductions apply to you, please don't hesitate to reach out to our firm for personalized guidance.
*It’s important to note that taxpayers can't claim both AOTC and LLC for the same student in the same year.
*Tax laws are subject to change. These credits and deductions are valid as of 2024.