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Education Tax Tips

Tax benefits might be available if you're saving for or paying education costs for:

  • Yourself
  • Another student who's a member of your immediate family

However, most benefits apply only to higher education. Also, you usually can't claim more than one benefit for the same qualifying education expense.

Education Credits -- Two education credits available can reduce the tax you owe dollar for dollar.

American Opportunity Credit -- This is available for tax years 2009 through 2017. It’s an expanded Hope Credit.

You might be able to claim an American Opportunity Credit for each eligible student. The credit is for up to $2,500 for qualified education expenses.


This is a per-student limit you must claim in the first four years of higher education. To learn more, see the Tax Credits for Higher Education tax tip.

Lifetime Learning Credit -- You might be able to claim this credit for up to $10,000 for qualified education expenses. You can claim this credit only once per return. However, there's no limit on the number of years you can claim the credit. 

To learn more, see the Tax Credits for Higher Education tax tip.

Education Benefits -- You also might be able to claim nine other education-related tax benefits.

Student-loan interest deduction -- If you're paying back loans you took to pay for higher education, you might be able to deduct up to $2,500 per return per year. The student-loan interest deduction is an adjustment to income. So, you can claim the deduction even if you don't itemize deductions. 

To learn more, see the Deducting Student-Loan Interest tax tip.

Tuition and fees deduction -- You might be able to deduct up to $4,000 of qualified education expenses paid during the year for:
• Yourself
• Your spouse
• Your dependent

This deduction expires on Dec. 31, 2013. To learn more, see the Tuition and Fees Deduction tax tip.

Student-loan cancellation -- If you're responsible for making loan payments and the loan is canceled, you usually must include the amount forgiven in your gross income. However, if your student loan is canceled, you might not have to include the amount in income if you meet certain requirements.

Student-loan repayment assistance -- Loan-repayment programs provide student-loan repayment assistance to participants. To qualify, the participants must provide certain services. These are usually primary health services in areas that are short of these services.

Coverdell education savings accounts (ESAs) -- Coverdell ESAs are tax-advantaged accounts that allow you to save money for education. The earnings are tax-free if used for qualified education expenses. You can’t deduct contributions to a Coverdell ESA. However, money deposited in the account grows tax-free until you withdraw it. 

To learn more, see the Education Savings Accounts (ESAs) tax tip.

Qualified tuition plans -- A qualified tuition plan (QTP) is a personal savings plan for paying a student's qualified education expenses at an eligible educational institution. Distributions from the account are tax-free if you use the money to pay for qualified expenses -- like room and board. 

To learn more, see the Qualified Tuition Plan (Section 529) tax tip.

IRAs -- You might be able to withdraw from your IRA penalty-free before age 59 1/2 for education. To do so,  you must pay qualified education expenses for any of these:

  • Yourself
  • Spouse
  • Children
  • Grandchildren

To learn more, see the Individual Retirement Accounts (IRAs) tax tip.

Tax-free U.S. Savings Bond interest -- You must usually pay tax on the interest earned on U.S. Savings Bonds. However, if you cash in savings bonds for qualified education expenses, you don't have to pay tax on the interest if you meet all requirements. 

To learn more, see U.S. Savings Bonds Interest Exclusion.

Employer-provided educational assistance -- You can receive educational assistance benefits from your employer under an educational assistance program. If you do, you can exclude up to $5,250 of those benefits each year. So, you don't have to include the benefits on your return. 

To learn more, see the Employer-Provided Educational Assistance tax tip.

Deduction for work-related education --You might be able to deduct expenses for work-related courses if both of these are true:

  • You're an employee.
  • You itemize deductions.

To learn more, see Publication 970: Tax Benefits for Education at www.irs.gov.

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