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Is college tuition deductible

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Is College Tuition Tax Deductible?

It's truly an understatement to say that college tuition has risen a lot in recent decades. If you wanted to attend a public 4-year institution in 2020, it would have cost you 31.4% more than it would have in 2010. If adjusted for inflation, college tuition in the United States has gone up 747.8% since 1963, according to EducationData.org. Whatever the reasons for the increase, one of the results has been the astronomical increase in student debt. As tuition costs increased, students and their families took out more debt, and today 43 million Americans owe more than $1.6 trillion in federal student loans. There are even 2.4 million retirees who still have student debt.

Table of contents

Key takeaways...Read more

College tuition tax deduction...Read more

What is a college tuition tax credit?...Read more

What college tuition credit is available to students?...Read more

The tuition and fees deduction...Read more

Other ways to take deductions...Read more

Key takeaways

  • College tuition is not tax-deductible
  • Education tax credits can help with education costs
  • Interest on college loans is tax-deductible
Little action has been taken to make things easier for students until recently. President Biden's new plan to help working- and middle-class federal student loan borrowers will offer ways to make payments a little easier. But there are already a few things students can do to make the cost of higher education easier to bear. If you're self-employed and going to school part-time, like so many other Americans, you'll want to know these tax tips.

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College tuition tax deduction

"Is tuition tax deductible" is usually one of the first questions both students and parents of students ask. Unfortunately, the IRS does not allow anyone to take the cost of college tuition as a deduction from their taxable income. But, for those whose income falls below a certain threshold, the federal government does offer something called tax credits to help ease the burden of paying for an education in the US. Rather than a deduction, they are called a higher education tax credit or a college student tax credit. So, is college tuition tax deductible? Unfortunately no, but tax credits are.

Quick tip

You'll need to submit an IRS Form 8863 with your tax return to claim education tax credits in 2022.

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What is a college tuition tax credit?

A college tuition credit is fundamentally different from a college tuition tax deduction in that it essentially reduces the amount of income tax you have to pay. It's like a discount on your tax bill after you've figured out all the tax you have to pay for the year. This is different from tax deductions, which are a sort of discount, too. But they reduce the amount of income you have that can be taxed. The best part about a college tuition credit (for taxes, not for completing a class) is that it usually ends up saving you more on taxes than deductions do.
What is a college tuition tax credit?
If you make $65,000 in a year, and your income tax rate is 25%, you'll owe $16,250 in taxes. The $2,000 laptop you bought for your online selling business can be a tax write-off if you're self-employed. That would lower your taxable income to $63,000, and you would owe $15,750. That's a $500 discount on your taxes. But if you claim that laptop as an educational expense and receive a $2,000 college student tax credit, for example, that would reduce your tax bill from $16,250 to 14,250. You would save $2,000 instead of $500.

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What college tuition credit is available to students?

There a couple of tax credits the IRS makes available to students and their parents to help offset the cost of higher education.

American opportunity credit

Lifetime learning credit

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The tuition and fees deduction

After all that talk about how tuition is not deductible, it's worth mentioning that for several years leading up to 2020, people paying tuition were able to deduct tuition costs from their taxable income – $4,000 in the 2020 tax year. If, for whatever reason, you have not yet filed your taxes for 2020, it may still be an option for you to take advantage of the deduction. Like the education tax credits available, this deduction has an income limit. Your adjusted gross income cannot exceed $80,000. To deduct tuition and fees for higher education, taxpayers need to report them on IRS Form 8917. The student's school will send a Form 1098-T to report the student's annual tuition and fee payments. These are the only amounts the IRS allows to be included on Form 8917.

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Other ways to take deductions

A.I.-based tax engine FlyFin makes finding every possible tax deduction easier than it has ever been for self-employed people and freelancers working their way through college. FlyFin offers self-employment tax calculators and a library of information about all the deductions and tax credits available to self-employed individuals.

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What’s FlyFin?

Wondering how to file 1099-MISC easily? FlyFin is the answer. FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. Using a powerful A.I., FlyFin tracks all your business expenses automatically. But anyone can file taxes through FlyFin! Our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes. You can download the FlyFin app and have your taxes filed in less than 15 minutes, saving you time and money.
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