These tax breaks may help offset the costs of college, although many
of them are subject to income limitations or phase out as income rises.*
For the most current and detailed information, visit irs.gov
and read Publication 970, Tax Benefits for Education.
Tax-Free Benefits provide tax-free help with education expenses
for qualified students, although they may be subject to income limitations.
Scholarships, fellowships, etc. are usually not taxed.
Coverdell Education Savings Account (ESA) can be set up for
beneficiaries under the age of 18.
Qualified Tuition Programs are sponsored by states or educational
institutions.
Education Savings Bond interest may be tax-free.
Employer-provided educational assistance up to $5,250 per
year may be tax-free.
Tax Credits directly reduce tax liability, but phase out as income
rises.
Hope Scholarship Credit - May be claimed for students in their
first two years of post-secondary education who are enrolled at least
half time. The maximum benefit per student per tax year is $1,500.
Lifetime Learning Credit - Each taxpayer may claim an annual
credit of up to 20% of the first $10,000 (maximum of $2,000 annually)
for out-of-pocket education expenses at eligible educational institutions.
Tax Deductions lower your taxable income, but may be subject to
income limits.
Student Loan Interest Deduction - Interest paid on qualified
educational loans may be deductible, up to $2,500.
Tuition and Fees Deduction - Up to $4,000 may be taken for
a student for whom no other education tax benefits are claimed, when
other income and usage requirements are met.
