Higher education costs paid in 2016 can mean tax savings when taxpayers file
their tax returns. If taxpayers, their spouses or their dependents took
post-high school coursework last year, they may be eligible for a tax credit or
deduction.
Here are some facts from the IRS about tax benefits for higher education.
For 2016, there are two tax credits available to help taxpayers offset the
costs of higher education. The American Opportunity Credit and the Lifetime
Learning Credit may reduce the amount of income tax owed. Use Form
8863 to claim the education credits.
The American Opportunity Credit (AOC) is:
- Worth a maximum benefit
up to $2,500 per eligible student.
- Only for the first four
years at an eligible college or vocational school.
- For students pursuing a
degree or other recognized education credential.
- For students enrolled at
least half time for at least one academic period during 2016. Taxpayers
can claim the AOC for a student enrolled in the first three months of 2017
as long as they paid qualified expenses in 2016.
The Lifetime Learning Credit (LLC) is:
- Worth a maximum benefit
up to $2,000 per tax return, per year, no matter how many students
qualify.
- Available for all years
of postsecondary education and for courses to acquire or improve job
skills.
- Available for an
unlimited number of tax years
The tuition and fees deduction can reduce the amount of income subject to
tax. This deduction may be beneficial for taxpayers who don't qualify for the
American Opportunity Credit or the Lifetime Learning Credit. Use Form
8917 to claim the tuition and fees deduction.
The Tuition and Fees Deduction is:
- Worth a maximum benefit
up to $4,000,
- Claimed as an adjustment
to income,
- Available even if a
taxpayer doesn’t itemize deductions on Schedule A,
- Limited to tuition and
certain related expenses required for enrollment or attendance at eligible
postsecondary educational institutions.
Additionally:
- Beginning in 2016, to be
eligible for an education benefit, a student is required to have Form
1098-T, Tuition Statement. They receive this form from the school they
attended. There are exceptions for some students. See Publication
970 for more details.
- They may only claim
qualifying expenses paid in 2016.
- They can’t claim either
credit if someone else claims them as a dependent.
- They can’t claim either
AOTC or LLC and the Tuition and Fees Deduction for the same student or for
the same expense in the same year.
- Income limits could
reduce the amount of credits or deductions they can claim.
- The Interactive
Tax Assistant tool on IRS.gov can help check eligibility.
IRS Free File. Taxpayers can use IRS Free File to prepare
and e-file their federal tax returns for free. File Form 8863, Education
Credits, with your Form 1040. Free File is only available at IRS.gov/freefile.
The IRS reminds students using the Free Application for Federal Student Aid
(FAFSA) that the IRS Data Retrieval Tool currently is unavailable. This
does not limit an individual’s ability to apply for aid. Applicants can
manually provide their tax return information. The IRS
offers alternatives for the retrieval of the income information needed.
Additional IRS Resources:
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