Education Credits and Deductions

 The American Opportunity Credit originally modified the existing Hope Credit for tax years 2009 and 2010, and was later extended for an additional two years - 2011 and 2012, making the benefit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two.

  • The maximum amount of the AOC is $2,500 per student. The credit is phased out (gradually reduced) if your modified adjusted gross income (AGI) is above $80,000 ($160,000 if you file a joint return).
  • The AOC can be claimed for the first four years of post-secondary education. 
  • Generally, 40% of the AOC is a refundable credit, which means that you can receive up to $1,000 even if you owe no taxes. However, none of the credit is refundable if the taxpayer claiming the credit is a child (a) who is under age 18 (or a student who is at least age 18 and under age 24 and whose earned income does not exceed one-half of his or her own support), (b) who has at least one living parent, and (c) who does not file a joint return.

The Hope Credit generally applies to 2008 and earlier tax years. It helps parents and students pay for post-secondary education.

  • The Hope Credit you are allowed may be limited by the amount of your income and the amount of your tax.
  • This is a nonrefundable credit, which means it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you.
  • This credit is for the payment of the first two years of tuition and related expenses.

The Lifetime Learning Credit helps parents and students pay for post-secondary education.

  • The maximum amount of the Lifetime Learning Credit is $2,000 for qualified education expenses paid for all students enrolled in eligible educational institutions. The credit  begins phasing out is $104,000 for joint filers and $52,000 for singles and heads of households.
  • There is no limit on the number of years the Lifetime Learning Credit can be claimed for each student.
  • The Lifetime Learning Credit may be particularly helpful to graduate students, students who are only taking one course, and those who are not pursuing a degree.

The term "qualified tuition and related expenses" has been expanded to include expenditures for "course materials." For this purpose, the term "course materials" means books, supplies, and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.

The term "qualified education expense" are the total costs of attending an eligible educational institution, including graduate school. For this purpose, they include amounts paid for tuition and fees; room and board; books, supplies, and equipment including any computer, computer software, fiber optic cable related to computer use, and internet access; and other necessary expenses (such as transportation).

DEDUCTIONS: A deduction reduces the a

The Student Loan Interest Deduction is taken as an adjustment to income.

  • The deduction can reduce the amount of your income subject to tax by up to $2,500.
  • You can claim this deduction even if you do not itemize deductions on Schedule A.
  • This is a special deduction allowed for paying interest on a student load used for higher education and it is interest you paid during the year on a qualified student loan.

mount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay.

The Tuition and Fees Deduction is taken as an adjustment to income.

  • The deduction can reduce the amount of your income subject to tax by up to $4,000.
  • You can claim this deduction even if you do not itemize deductions on Schedule A.
  • You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction by choosing the one that will give you the lower tax.

Back to Categories