Can You Claim College Tuition on Taxes? Here’s What to Know
Learn how to navigate tax benefits for college tuition, including eligibility, credits, deductions, and filing requirements.
With rising education costs, taxpayers are eager to explore tax benefits related to college tuition. Understanding these opportunities can lead to significant savings and ease the financial burden of higher education.
Taxpayers may qualify for specific credits or deductions to offset tuition expenses. Knowing how these options work is key to maximizing savings.
Basic Rules for Claiming Tuition
To claim tuition-related tax benefits, taxpayers must meet specific IRS eligibility criteria. First, ensure the institution qualifies as an eligible educational institution, which includes colleges, universities, vocational schools, or other postsecondary institutions participating in U.S. Department of Education student aid programs.
The taxpayer, their spouse, or a dependent must incur the tuition expenses. If the student is claimed as a dependent, only the taxpayer claiming the dependent can claim the benefits. Additionally, tuition payments must be made during the tax year being filed. For instance, tuition paid in December 2024 for a semester beginning in January 2025 qualifies for the 2024 tax return.
Qualifying Education Expenses
Qualified education expenses generally include tuition and fees required for enrollment or attendance at an eligible institution. Nonessential fees, such as those for room and board, insurance, or transportation, do not qualify.
Books and supplies may qualify if the institution requires them for enrollment. For example, if a course mandates purchasing a textbook directly from the university bookstore, it is eligible. However, if students can purchase materials from various sources, these costs may not qualify. Similarly, equipment like computers or internet access may be included if explicitly required by the institution. Documentation from the school is essential to support these claims.
Credits vs. Deductions
Tax credits, such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), directly reduce the amount of tax owed. The AOTC provides up to $2,500 per student for qualified expenses, with 40% refundable, offering up to $1,000 back even if no tax is owed.
Deductions, like the Tuition and Fees Deduction (available through 2024), reduce taxable income, lowering overall tax liability. For example, a $4,000 deduction reduces taxes by $960 for someone in the 24% tax bracket. Starting in 2025, taxpayers will need to rely on credits exclusively.
Choosing between credits and deductions depends on individual circumstances. Credits often yield greater savings, especially for those eligible for the full AOTC. However, credits like the AOTC phase out for higher-income taxpayers, with thresholds beginning at $80,000 for single filers and $160,000 for married filers in 2024.
Adjusted Gross Income Factors
Adjusted gross income (AGI) plays a critical role in determining eligibility for education tax benefits. As income increases, eligibility for credits diminishes due to phase-out limits.
To preserve eligibility, taxpayers can lower AGI by contributing to tax-deferred retirement accounts like a 401(k) or traditional IRA. Other adjustments, such as deducting student loan interest, can further reduce AGI and enhance eligibility for credits.
Steps for Filing
Claiming education-related tax benefits requires careful preparation. Start by gathering documentation, including Form 1098-T from the institution, which details tuition paid and scholarships or grants received. Verify that the information matches personal records to avoid errors.
To claim the AOTC or LLC, complete Form 8863 and attach it to Form 1040 or 1040-SR. This form includes the institution’s Employer Identification Number (EIN) and a breakdown of qualified expenses. Taxpayers should also ensure their income and filing status meet eligibility requirements. Using tax software or consulting a professional can help navigate phase-out limits and other criteria. Filing electronically reduces errors and speeds up processing.
Recordkeeping Requirements
Maintaining thorough records is essential to substantiate education-related tax claims. Keep receipts for tuition payments, invoices for required books or supplies, and documentation from the institution on mandatory fees or equipment. Retain these records for at least three years from the filing date or the return’s due date, whichever is later.
Save copies of Form 1098-T and related documents, such as financial aid award letters, to show how scholarships or grants were allocated. For example, if part of a scholarship covered non-qualified expenses, document how the remainder was applied to tuition or other eligible costs. Proof of payment, such as bank statements or credit card receipts, strengthens claims in case of an audit.
Digital tools can streamline recordkeeping by organizing and securely storing documents electronically. Many tax software platforms allow users to upload and save supporting materials, simplifying future access and reference.