Tax Benefits for Education
There are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American Opportunity Credit and the Lifetime Learning Credit.
For each student, you can elect for any year only one of the credits. For example, if you elect to take the American Opportunity Credit for a child on your tax return, you cannot, for that same child, also claim the Lifetime Learning Credit for. If you pay qualified education expenses for more than one student in the same year, you can choose to take the credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for another student in the same year.
You are eligible to claim these credits if the following requirements are met:
You pay qualified education expenses of higher education
You pay the education expenses for an eligible student
The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return
American Opportunity Credit
You may be able to claim an American Opportunity Credit of up to $2,500 for qualified education expenses paid for each eligible student. Your allowable credit may be limited by the amount of your income. Also, the nonrefundable part of the credit may be limited by the amount of your tax.
Lifetime Learning Credit
You may also be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for all eligible students. There is no limit on the number of years this credit can be claimed for each student. Your allowable credit may be limited by the amount of your income and the amount of your tax.
The National Association of Student Financial Aid Administrators provides more detailed information about both of these credits.
Tuition and Fees Deduction
You may be able to deduct qualified tuition and related expenses paid during the year for yourself, your spouse or a dependent. You cannot claim this deduction if your filing status is married filing separately or if another person is entitled to claim an exemption for you as a dependent on his or her tax return. The tuition and expenses must be for higher education. This deduction can reduce the amount of your taxable income by up to $4,000. This deduction is taken as an adjustment to income even if you do not itemize deductions.
Student Loan Interest Deduction
Generally, student loan interest is interest you paid during the year on a loan (such as a Federal Direct Student Loan or Direct PLUS Loan) you borrowed to pay qualified higher education expenses.
Note: Carnegie Mellon University does not provide tax advice. Please consult your tax advisor for tax advice.