College Students: Are You Getting Your Education Tax Credits?

Tuition, room and board, books – oh my! When all is said and done (and paid for), the cost of getting through college can be overwhelming. Fortunately, there are tax benefits for being on the path to higher education. Learn about the education tax credits you could claim to offset those climbing college expenses and the one deduction that did not survive the 2018 tax law changes. 

Parents or students: Who can claim an education credit  

If your child is enrolled in college and you claim them as a dependent on your return, you may receive the credit. If you are a college student and no one claims you as a dependent, you can claim the credit. Whoever is claiming the credit will need a Form 1098-T from the school that shows how much was paid for tuition and qualified expenses. If you don’t have a 1098-T – don’t panic! You can always request one, but not all schools are required to provide them. If your institution doesn’t send you a 1098-T, you will still need a record of enrollment and what was paid for tuition and expenses.

What education expenses qualify for a tax credit? 

Expenses that qualify for the education tax credit include tuition and fees that are required for enrollment. If you are claiming the American Opportunity Credit, you can also count the cost of books, supplies, and materials necessary for your education.  

Costs that do not qualify for the education credit include room and board, insurance, health fees, transportation, and living expenses. 

What is the American Opportunity Credit (AOC)?

The AOC is a tax credit worth up to $2,500 per year for an eligible college student. It is refundable up to $1,000, which means you can get money back even if you do not owe any taxes. You may claim this credit a maximum of four times per eligible college student.  

Can I Claim the American Opportunity Credit?  

The IRS says that to qualify for the American Opportunity Credit, a college student: 

  • Must be enrolled as a “half-time” student or more, for a minimum of one academic period.  
  • Must be enrolled in a program that will lead to a degree, certification, or other recognized credential. 
  • Must not have finished four years of college-level education at the beginning of the tax year. 

There is an income threshold for claiming the AOC as well. To get the full credit amount, your modified adjusted gross income must be less than $80,000 (or $160,000 if you are married filing jointly). If your MAGI is above $80,000 you will receive a reduced amount, and if it is over $90,000, you won’t be able to claim the credit at all.

What is the Lifetime Learning Credit? 

The Lifetime Learning Credit is worth up to $2,000 per year for each eligible student you claim as a dependent. If no one can claim you, go ahead and take advantage of this credit yourself. The number of years you can claim the credit is unlimited, and there is no minimum enrollment requirement to qualify for the Lifetime Learning Credit. 

Which Education Tax Credit Should I Take

Which education credit should you take?

Some students will qualify for the AOC and the Lifetime Learning Credit, but the IRS won’t let you take both. Typically, undergraduate students who qualify for both credits will take the AOC because it is worth more and it is refundable. The Lifetime Learning Credit is best suited for graduate students because there is no limit to the number of years you can claim it. Undergraduate students taking only a few courses are also more likely to take the Lifetime Learning Credit because there is no minimum enrollment requirement. 

Do I have to claim the same credit for two different dependents? 

No. Even though you cannot get both credits for the same dependent, you can claim the AOC for Child 1, and the Lifetime Learning Credit for Child 2 during the same tax year.   

Can I still deduct college tuition and fees? 

Before the 2018 tax law changes, the Tuition and Fees Deduction was one more way college students and parents could offset the cost of higher education. It allowed you to adjust your income up to $4,000 for qualifying expenses. But the Tax Cuts and Jobs Act has eliminated the Tuition and Fees Deduction completely so you will not be able to take this deduction when you file your return in 2019. 

How much can I deduct for student loan interest?  

The student loan interest deduction is another tax advantage offered to college students or parents paying for college. It can be taken in addition to an education tax credit. The new tax plan did not change the amount you can deduct for your student loan interest. If you meet all the requirements for the deduction, you will still be able to claim up to $2,500 for interest paid on your student loans.  

How does the GI Bill affect what I can deduct?

If you paid for qualified education expenses with a GI bill or other payments you received from the Department of Veterans Affairs (VA), those amounts are not taxable. This means that you can’t claim any deductions for those amounts. You are only allowed to claim expenses that are not covered by whatever tax-free assistance you may receive.

How do I claim an education credit? 

When you file your taxes with TaxSlayer, our software will guide you through the steps for claiming your education tax credit. We’ll make sure you have the proper forms and information to ensure you’re getting the maximum refund possible! 

This article is up to date and accounts for tax law changes for tax year 2018 (tax returns filed in 2019). Learn more about tax reform enacted under the Tax Cuts and Jobs Act here.

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