Financial literacy

Education-Related Tax Deductions and Credits for College Tuition & Expenses

Qualified Expenses for Tax Deductions and credits

You are among many American students looking for a means of cutting down on their college expenditure. Such conversations have been making rounds in media spaces and congressional houses with little to no success. Nonetheless, few gaps have been created in recent years to give you a chance to reduce your tax payments.

Recently, Congress restored a mandate to enable learners and taxpayers who have student dependents to pay less. Such measures were created in collaboration with the IRS guidelines that provided four tax deductions and credits to qualified persons. The process of being eligible is filled with various conditions that you have to meet.

To begin with, qualification depends on the nature of the expenses you are being taxed on. The term qualified expenses refer to all high costs of the education process, including tuition, fees, book, equipment, and supplies. Drawing from this, the IRS has offered Tax Benefits for Educations to students attending eligible institutions.

Tax Perks for Education

Whichever your perception of the IRA is, credit to their attempts in reducing the cost of getting a college education, IRA made this publication to help us understand what they meant by tax credits and tax deductions. How about we jump into it now?

Tax Credit

After every tax year, you are required to file your tax returns, and in those returns, there is an amount that the IRA will reduce from your earnings, referred to as tax liability. Therefore, a tax credit is a certain amount that the IRA decides to subtract from your tax liability so that you can pay less. If the credit is larger than the liability, then the IRA owes you some money.

So, how can you take advantage of this provision as a student or a person who has a dependent? The IRA offers two exciting tax credits for paying college tuition and other qualified expenses.

  • Lifetime Learning Credit (LLC)
  • American Opportunity Tax Credit (AOTC)

Tax Deductions

The concept of tax deductions is not that very different from that of credits. You already understand what a tax liability is. Now, the liability is usually a percentage of your total earnings throughout the tax year, which are referred to as taxable income. Sums deducted from your taxable income are referred to as tax deductions so that the percentage of your liability can be smaller.

If you are seeking to enjoy tax deductions, there are two other options you can pick from:

  • Student loan interest deduction
  • Student tuition and fees deduction

Education-Related Credits and Deductions

Barely knowing the names of the credits and deductions is not enough for you to enjoy their benefits. In 2019, Congress passed a law to bring back tax reductions for the years 2018, 2019, and 2020. Therefore, if your question is whether college tuition is deductible, two college student tax credits and two deductions have been created for that reason in particular.

1. Lifetime Learning Credit (LLC)

Suppose you are a student proceeding in a professional degree. In that case, a graduate, an undergraduate degree, or you are currently in a technical college, then LLC is the first benefit for you. LLC benefits are offered only to qualified students who are currently enrolled in eligible institutions of higher learning. If you are looking to claim this credit, you have to remember that the maximum you can get is $2,000.

LLC will be offered to you on the guidelines that you can only receive 20% of the initial $10,000 qualified expenses. Before you get excited that the amount is more considerable than your liability, allow me to burst your bubble. The IRS will not give you this money in a refund, and on the contrary, they will enable you to redirect it into paying other liabilities you will have in the future.

Who Can Claim?

LLC can only be claimed by anyone who fits the following descriptions.

  • College students who wish to claim it for themselves or persons with college student dependents spouses who want to claim on their behalf. The caveat to this is that for you to claim for a spouse of a dependent, you must have included them in your returns.
  • To claim this credit, you need evidence showing that you have paid your college expenses.
  • The payments must have been made to an eligible institution of higher learning.
  • Your Modified Adjusted Gross Income (MAGI) should be below $69,000 if you are a single filer and $138,000 if you file jointly. Remember, if your MAGI is between $59,000 sn $69,000, enable your LLC benefits to begin to decrease progressively.

American Opportunity Tax Credit (AOTC)

In my opinion, AOTC is a more exciting college student tax credit than LLC. Not to make comparisons, but AOTC offers more credit than LLC does. Firstly, there is a maximum claim of $2,500 which can be claimed in the event that it happens to be larger than your total liability. AOTC can only be claimed within the first four years of higher learning.

Read on to the criteria if you want to check whether you qualify or not.

  • Perhaps a repetition, but still an essential requirement, you should currently be enrolled in a recognized institution of higher learning.
  • You must have completed at least half of an academic period at the start of the tax year (academic periods could be semesters, trimesters, quarters, and more, depending on the institution).
  • At the beginning of the tax year, you must not have completed four years of learning, or else you will be disqualified.
  • Former felons of drug charges are not eligible for this credit.

2. Student Loan Interest Deduction

It is already unfortunate that college tuition and fees are expensive, however, going through while paying a student loan can be worse. This deduction is for those who are paying any kind of student loan, may it be private or sourced federally. Claiming such a deduction puts in a position not paying tax on amounts up to $2,500.

Who Can Claim?

Just like every benefit provided thus far has its conditions, so makes this deduction.

  • You must have an eligible student loan, and there should be a record that you have paid interest on the loan within the tax year.
  • The year should also be eligible by law to have this deduction applied.
  • The MAGI range of gradual reduction is between $70,000 and $85,000 if you are a single filer and $140,000 to $170,000 if you file jointly. Importantly if your MAGI is above $85,000 for single filers and $170,000 for joint filers, then you are automatically disqualified.

3. Student Tuition Fees and Deductions

While some credits are still in action and claimable, you can still claim this one although it has expired. With a maximum possible deduction of $4,000, it is perhaps the one offering the highest amount among the rest.

Who Can Claim?

If you are trying to hop on this one, then you need to make sure that you:

  • Are a student or a parent paying school expenses for a vocational school, undergraduate degree, or a degree program.
  • Have not claimed any tax credits in the past.
  • Meet the following MAGI restrictions:

> For MAGI amounts of $65,000 and below, you are allowed to claim.
> For MAGI amounts between $65,000 and $80,000, you can claim a maximum of $2,000.
> If you file jointly, the MAGI limits are $130,000 and $160,000.


Going through college is strenuous enough, not to add that the cost implications are so high that it is causing a national crisis. I appreciate your desire to complete your degree while spending as little money as necessary on school expenditures. Learning about the notable credits and deductions will not be enough.

Even in their reluctance to make a lasting change, the government has still provided several ways you can apply to get reductions in the amount you are liable to the IRS. Take advantage of these small gaps and save yourself some dollars while at it.


Oleksandr graduated from Dnipro National University of railway transport in Ukraine. At first, he was a customer success manager at PocketGuard and in 1.5 years has been promoted to product manager....

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