Tax Deductions And Credits You Can Claim For Tuition And Fees

Kemberley Washington Tax Writer

Written By Kemberley Washington Tax Writer

Kemberley Washington Tax Writer

Tax Writer Dawn Nici Personal Finance Editor

Dawn Nici is a consumer finance editor. Her more than 20 years of experience in financial and business reporting includes coverage of the New York Stock Exchange and other major economic stories in New York, Washington, D.C. and Los Angeles. She spen.

Dawn Nici Personal Finance Editor

| Personal Finance Editor

Updated: Mar 13, 2024, 8:11am

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Tax Deductions And Credits You Can Claim For Tuition And Fees

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College is an expensive undertaking. For the 2023-2024 year, the average cost of in-state tuition for a public four-year college is $11,260, according to the College Board. The number is significantly more for private four-year institutions, which average about $41,540.

Fortunately, there are some tax benefits to cushion the financial impact of paying for college. Tax credits and deductions can help offset college expenses for yourself or your dependents.

What Are the Different Types of Education Tax Credits?

An education tax credit allows you to reduce your taxes owed and may, in some cases, generate a tax refund. The IRS offers two types of education tax credits to offset tuition and fees you have paid. You can claim either the American opportunity tax credit or the lifetime learning credit.

American Opportunity Tax Credit

The American opportunity tax credit (AOTC) is available for students who are in their first four years of college, trade school or other qualified higher education institution. To be eligible, you must have spent money toward tuition and fees that wasn’t reimbursed or covered by scholarships. Some expenses, such as room and board, don’t qualify for the tax credit.

If you borrowed money to pay for college, you can claim the AOTC for qualified expenses. You should claim the AOTC in the year the expenses are paid—not the year the loan is repaid.

For the 2023 tax year, you can claim a maximum credit of up to $2,500 per student. The credit is refundable, even if you don’t owe any taxes. In that case, you may receive some of the credit as a refund.

To claim the credit, you must:

Pursue a degree or other recognized educational credential
Enroll at least half-time during the tax year for at least one academic period
Have not yet completed the first four years of higher education at the beginning of the tax year
Have no felony drug convictions at the end of the tax year
Have not claimed the AOTC or the earlier Hope credit (which was replaced by the AOTC) for more than four years
Have a modified adjusted gross income (MAGI) of less than $90,000 ($180,000 if married filing jointly)

Lifetime Learning Credit

Another type of education tax credit is the lifetime learning credit. For the 2023 tax year, you can claim up to $2,000 per tax return.

The lifetime learning credit is typically used by students who don’t qualify for the AOTC. As its name implies, you can use it for a lifetime, beyond your first four years of education.

But if you qualify for both credits and have to choose, the AOTC may be more beneficial. Since the lifetime learning credit is a nonrefundable tax credit, it can only reduce the amount you owe. It won’t generate a tax refund, as the AOTC can.

To claim the credit, you must:

Be enrolled at an eligible educational institution for at least one academic period beginning in the tax year
Take courses toward a degree or educational credential or to improve job skills
Have a MAGI of less than $90,000 ($180,000 if you are married and filing a joint tax return)

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Tax Writer

Kemberley Washington is a tax journalist and provides consumer-friendly tax tips for individuals and businesses. Her work goes beyond tax articles. She has been instrumental in tax product reviews and online tax calculators to help individuals make informed tax decisions. Her work has been featured in Yahoo Finance, Bankrate.com, SmartAsset, Black Enterprise, New Orleans Agenda, and more. She frequently appears on NBC's WDSU news broadcast.

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