Standard vs Itemized
A Guide to College Tuition Fee Deduction
Find out if you should itemize your deduction
Step 1/4
Are you a freelancer or business owner?
Education Benefits You Might Not Know About
As student loan debt continues to rise, the question "is college tuition tax deductible?" is becoming more common. Though college tuition is not allowed to be directly deducted from income taxes or self-employment taxes, there are some options.
For students and their parents who have an income below a certain threshold, the federal government eases, even if only slightly, the tax burdens on them. The idea is to lower the financial barriers to American students getting a college education.
To do this, the IRS offers several tax credits for students and their parents who pay their children's tuition. They also allow taxpayers in that income range to take several tax deductions specific to college students.
Table of contents
What is the American opportunity credit?
The American opportunity tax credit (AOTC) is an educational credit to offset qualified education expenses for an eligible student for the first four years of higher education. The maximum annual American opportunity credit is $2,500 for every eligible student. Interestingly, you can also get a 40 percent refund (up to $1,000) if the opportunity credits brings your tax owed to zero.
The American opportunity tax credit is 100 percent of the first $2,000 of the qualified education expenses paid by you for each eligible student and 25 percent of the next $2,000 of qualified expenses paid for that student.
How does a tax credit work?
What expenses qualify to American opportunity credit?
Who is eligible for American opportunity credit?
Is American opportunity credit refundable?
What is Lifetime learning credit?
The lifetime learning credit is also not a tuition tax credit, nor is it a tuition and fees deduction that taxpayers can take. Instead, it benefits college students of all kinds by letting them take 20% of their first $10,000 in education expenses off the tax they owe at the end of the year. If they spent $10,000 or more in tuition, student fees or expenses related to coursework, that's a $2,000 tax credit. The same rules about qualified education expenses that apply to the American opportunity tax credit apply to this education credit, too.
Who is eligible?
Is lifetime learning credit refundable?
Student loan interest deductions
You’re surely familiar with student debt if you're an American who is in college or went to college. Around 44 million Americans have student debt. That's one in eight of us owing a combined $1.7 trillion in outstanding student loans.
A few decades ago, state and local funding for higher education experienced deep cuts, and more of the costs of college were pushed onto students. Tuition costs have more than doubled, and over the years going into debt was the only option for many people to go to college.
Believe it or not, there is one bright side to this, if only a small one. You might not know that the interest that accrues on your student loans can be written off your taxes at the end of the year. It depends on what your income was for the year and of course on how much student loan interest you paid, but you can deduct up to $2,500.
Loan requirements
For a taxpayer to claim this deduction, their loan itself needs to satisfy some requirements. The loan has to have been taken out to pay for higher education expenses, like tuition, school fees, books, etc.
Those expenses need to have been incurred by someone who was an eligible student at the time. And, the expenses the loan pays for can't have been incurred before or after you took out the loan.
Income limit
Your adjusted gross income needs to be lower than $85,000 to qualify to write off student loan interest from your taxes. The limit is $170,000 for taxpayers who are married and filing jointly. The closer a person is to that limit, the less they are allowed to deduct for student loan interest.
IRS questions and answers
The IRS isn't exactly known for making taxes easily understandable, but they offer comprehensive information about education tax credits and write-offs at IRS.gov.
Use this guide to find information about some of the other important itemized deductions that are available to taxpayers, some specifically for freelancers and self-employed individuals for paying estimated taxes. You can also read about the form 8863 on the link.
What’s FlyFin?
Geared specifically toward freelancers and the self-employed, FlyFin's A.I.-powered tax service finds every possible tax deduction and provides free CPA advice 24/7 for any and all tax questions.
Anyone, freelancer or not, can file taxes through the FlyFin app with the support of the CPA team and its knowledge of education tax benefits at a fraction of the normal CPA cost.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
Is this article helpful for you?
Yes
No