Can Graduate Students Use the Tuition Tax Credit?

By: Mark Kennan

You can use Form 1040 to claim any of the education tax benefits.

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Graduate school's expensive, so any tax breaks you can drum up to offset your costs are always welcome. Generally, graduate students -- or those claiming them as a dependent -- won't be able to claim the American opportunity credit but will still be eligible for the tuition and fees deduction and the lifetime learning credit.

American Opportunity Credit

You can claim the American opportunity credit for only four tax years, and you can't claim it if you've finished your first four years of post-secondary school before the start of the year. However, this leaves open the possibility of using the American opportunity credit for your first semester of grad school if you graduated in the spring and started graduate school in the fall and if that tax year is no more than the fourth year you have claimed the credit. The advantage to claiming the American opportunity credit is that the $2,500 maximum credit is larger than the other tax breaks and up to 40 percent is refundable, which means that even if you don't owe any taxes, you'll get up to a $1,000 refund. The other advantage is you include the cost of books and other supplies when figuring the credit.

Other AOC Criteria

If you can use the American opportunity credit for grad school, you still have to meet several other requirements. First, you can't have any felony drug convictions on your record. Second, you must be enrolled at least half-time and be pursuing a specific degree. Finally, you or whoever is claiming you as a dependent can't have a modified adjusted gross income of $90,000 or more ($180,000 or more if married filing jointly) and can't use the married filing separately filing status.

Lifetime Learning Credit

Graduate school tuition qualifies for the lifetime learning credit even if you aren't pursuing a specific degree or if you aren't enrolled at least half-time. However, your modified adjusted gross income can't be too high for your filing status and you can't use the married filing separately filing status. The lifetime learning credit equals 20 percent of your tuition and required fees, up to a maximum credit of $2,000. However, it is a non-refundable credit, which means if you don't owe any taxes, you won't have it refunded to you.

Tuition and Fees Deduction

If you don't qualify for the lifetime learning credit, you might still be able to deduct up to $4,000 of your graduate school tuition and fees under this deduction. You have to be below the income limits and can't use the married filing separately status, but the income limits are higher than the lifetime learning credit limits. You also don't have to be enrolled at least half-time or pursuing a specific degree.


About the Author

Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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