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Iowa College Student Aid Commission
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Available Higher Education Tax Benefits for the 2012 Tax Year
Higher education tax incentives are available to students and families to help reduce the overall cost of a college education. Below is more information about the various tax deductions and credits the IRS offers to individuals and families paying higher education expenses.
(The following information is intended for educational purposes and should not be considered legal or tax advice. Please consult with a tax advisor or attorney for more information regarding higher education tax benefits or refer to IRS Publication 970 on Tax Benefits for Education.)
Higher education tax incentives are available to students and families to help reduce the overall cost of a college education. Below is more information about the various tax deductions and credits the IRS offers to individuals and families paying higher education expenses.
(The following information is intended for educational purposes and should not be considered legal or tax advice. Please consult with a tax advisor or attorney for more information regarding higher education tax benefits or refer to IRS Publication 970 on Tax Benefits for Education.)
American Opportunity Tax Credit
This credit allows taxpayers to reduce their federal income tax by up to $2,500 per eligible student for out-of-pocket educational expenses including tuition, fees, eligible books, supplies and equipment. Up to $1,000 of the credit is refundable if the credit is more than the amount of tax owed. This credit can be used annually for the first four years of undergraduate postsecondary education.
Lifetime Learning Credit
This credit allows taxpayers to reduce their federal income tax by up to $2,000 per tax return (not per student) for qualified education expenses including tuition and fees required for enrollment. These fees can include amounts required to be paid to the educational institution for course-related books, supplies and equipment. Unlike the American Opportunity Tax Credit, the Lifetime Learning Credit is not refundable. This credit can be used annually for all years of postsecondary education and courses needed to acquire or improve job skills.
Student Loan Interest Deduction
This deduction enables eligible student loan borrowers to reduce their taxable income, by a maximum of $2,500, based on the amount of student loan interest paid during the tax year. For 2012, the maximum modified adjusted gross income (MAGI) for this deduction is $75,000 for single tax payers and $155,000 for married couples filing joint returns.
Tuition and Fees Deduction
Tax payers can reduce their taxable income by up to $4,000 for qualified educational expenses which can include: tuition, fees, and amounts paid to the educational institution for course-related books, supplies and equipment. The maximum modified adjusted gross income (MAGI) eligible for this program is $80,000 for single tax payers or $160,000 for married tax payers filing jointly.
This credit allows taxpayers to reduce their federal income tax by up to $2,500 per eligible student for out-of-pocket educational expenses including tuition, fees, eligible books, supplies and equipment. Up to $1,000 of the credit is refundable if the credit is more than the amount of tax owed. This credit can be used annually for the first four years of undergraduate postsecondary education.
Lifetime Learning Credit
This credit allows taxpayers to reduce their federal income tax by up to $2,000 per tax return (not per student) for qualified education expenses including tuition and fees required for enrollment. These fees can include amounts required to be paid to the educational institution for course-related books, supplies and equipment. Unlike the American Opportunity Tax Credit, the Lifetime Learning Credit is not refundable. This credit can be used annually for all years of postsecondary education and courses needed to acquire or improve job skills.
Student Loan Interest Deduction
This deduction enables eligible student loan borrowers to reduce their taxable income, by a maximum of $2,500, based on the amount of student loan interest paid during the tax year. For 2012, the maximum modified adjusted gross income (MAGI) for this deduction is $75,000 for single tax payers and $155,000 for married couples filing joint returns.
Tuition and Fees Deduction
Tax payers can reduce their taxable income by up to $4,000 for qualified educational expenses which can include: tuition, fees, and amounts paid to the educational institution for course-related books, supplies and equipment. The maximum modified adjusted gross income (MAGI) eligible for this program is $80,000 for single tax payers or $160,000 for married tax payers filing jointly.
Check out the IRS' Publication 970 for additional information about these and other tax benefits for education.