Other Financial Aid Resources

Tax Credit

IRS Credits and Deductions

Several new tax benefits are available to help families meet the cost of post-secondary education. These tax benefits are intended to help students and their parents, as well as all working Americans, to fulfill a variety of educational objectives.

1. The American Opportunity Credit

This credit can help parents and students pay part of the cost of the first four years of college. The American Recovery and Reinvestment Act modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student. Generally, 40 percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.

2. The Hope Credit

The credit can help students and parents pay part of the cost of the first two years of college. This credit generally applies to 2008 and earlier tax years. However, for tax year 2009 a special expanded Hope Credit of up to $3,600 may be claimed for a student attending college in a Midwestern disaster area as long as you do not claim an American Opportunity Tax Credit for any other student in 2009.

3. The Lifetime Learning Credit

This credit can help pay for undergraduate, graduate and professional degree courses – including courses to improve job skills – regardless of the number of years in the program. 

For more information, see IRS Publication 970.

4. Tuition and fees deduction

Students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000. This deduction is an adjustment to income, which means the deduction will reduce the amount of your income subject to tax. The Tuition and Fees Deduction may be beneficial to you if you do not qualify for the American Opportunity, Hope, or Lifetime Learning Credits.

You cannot claim the American Opportunity and the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim any of the credits if you claim a tuition and fees deduction for the same student in the same year. To qualify for an education credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit. 

For more information, see Publication 970, Tax Benefits for Education, and Publication 520, Scholarships and Fellowships, are available from the IRS Web site or by calling 1-800-TAX-FORM. FORM (800-829-3676).

Links:
  • Form 8863, Education Credits (PDF 82K)
  • Publication 970, Tax Benefits for Education (PDF 368K)