Tax Incentives for Education

The following information is provided for educational purposes only and does not constitute professional tax, accounting or legal advice. As tax laws are subject to change, we recommend that you seek the advice of a tax advisor regarding your specific financial situation.

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The Taxpayer Relief Act of 1997, and subsequent additions, created several new tax benefits for middle-income families.

Hope Credit

A tax credit that allows you to claim part of a qualifying student's first two years of college. Income limits apply.

  • The student must be in the first or second year of a degree or certificate-granting program and must be attending at least half-time.
  • There cannot be any felony drug convictions on the student's record.

Lifetime Learning Credit

You can claim a tax credit for out-of-pocket qualified educational expenses. Income limits apply.

  • This credit is calculated per family, not per student. The maximum credits are the same, no matter how many family members are in school.
  • Available for all years of post-secondary education and for an unlimited number of years.
  • The student only needs to be enrolled in one course and does not need to be degree-seeking.
  • There cannot be any felony drug convictions on the student's record.

Tuition and Fees Deduction

You may reduce the amount of your income subject to tax by part of qualifying tuition and fees paid even if you do not itemize deductions on Schedule A. Income limits apply.

  • Deduction is taken as an adjustment to income on 1040 or 1040A.
  • May be beneficial for taxpayers whose income exceeds caps for Hope or Lifetime Learning credits.
  • Qualifying expenses must be paid for taxpayer, spouse or dependent enrolled in eligible post-secondary institution.

Student Loan Interest Deduction

You can deduct interest payments made on one or more qualifying educational loans up to $2,500 per year. You can claim this deduction even if you do not itemize deductions. A student claimed as a dependent on parents' taxes may not claim the deduction. Income limits apply.