What Educational Expenses Are Tax Deductible?

By: Ryan Cockerham | Reviewed by: Ashley Donohoe, MBA | Updated March 31, 2019

You cannot deduct an expense and also take it as a tax credit.

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In today's society, financing the cost of a college education can be an expensive proposition. With tuition rates soaring alongside housing costs, many parents fear that their best efforts to save money for their children's college fund simply won't be enough. Although there's no easy "fix" for this particular issue, certain federal programs are in place to help individuals offset the costs of their college program. In fact, the Internal Revenue Service has identified a number of deductible education expenses that will allow parents or independent college students to get back some of the money they have invested in the college process.

Tip

Although some tuition reimbursement IRS deductions have disappeared since 2018, a variety of credits and loan interest deductions are still available that can help individuals offset the high cost of college enrollment today.

Tuition and Fees Deduction Basics

Although the tuition and fees deduction established by the IRS has now expired following the passage of the Bipartisan Budget Act, this tax break is still worth mentioning due to the significant assistance it provided many families.

The tuition and fees deduction allowed qualifying individuals to deduct up to $4,000 from their taxable income. In order to qualify, the individual in question had to provide proof that they paid tuition expenses for themselves, a dependent, a relative or a friend. This particular deduction was considered an "adjustment" to income, meaning that it was possible to claim it even in situations where other deductions had not been itemized as part of a Schedule A Form.

Although the loss of the tuition and fees deduction has made it somewhat more difficult to take advantage of these tax savings, a series of additional credits and deductions are still available.

Student Loan Interest Deduction Basics

Another important education tax deduction that still remains available is the student loan interest deduction. This is particularly beneficial for students or parents who have taken out a loan for studies to gain valuable tax breaks on any interest they pay on the loan. In order to qualify for this deduction, a specific set of qualifications must be met.

For example, the individual requesting the deduction must be legally obligated to pay back the loan, i.e., the original signer on the loan documents. Among other requirements, there is also a maximum income threshold, which voids eligibility for the deduction when the borrower's income exceeds the specified amount.

It is also important to note here that the IRS makes a clear distinction between student loans and loans that can be used to pay for college expenses. According to IRS guidelines, student loans only qualify for this deduction if all of the money in the loan is used to pay eligible education expenses.

Identifying Deductible Education Expenses

Defining qualified educational expenses is particularly important when attempting to claim the student loan interest deduction. The IRS defines qualifying educational expenses as those attached to enrollment tuition, administrative fees associated with the cost of attendance, school supplies and any transportation expenses that are required in order to enroll.

Credits and Tax Savings

Outside of the realm of deductions, tax credits such as the American opportunity tax credit and the lifetime learning credit can also be used to help reduce money owed. These particular credits come with their own specific set of qualifications and guidelines. That being said, both the AOTC and LLC can help reduce the amount of income tax an individual will have to pay, even though they have not technically qualified for a deduction.

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About the Author

Ryan Cockerham is a nationally recognized author specializing in all things business and finance. His work has served the business, nonprofit and political community. Ryan's work has been featured on PocketSense, Zacks Investment Research, SFGate Home Guides, Bloomberg, HuffPost and more.

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