As of 2018, college tuition can no longer be claimed on taxes. However, some higher education expenses, such as textbook fees, remain tax-deductible as long as the educational institute is part of the federal student aid program. Parents who send their children to private schools can also claim a tax credit in a small number of states.
Eligible Educational Institutions
In terms of higher education, the IRS only allows education expenses to be claimed on taxes if the student is enrolled in a trade school, university, college or "other post-secondary school" that is eligible to participate in the U.S. Department of Education's student aid program. If you receive Form 1098-T, you can claim education expenses on your taxes. If not, look for your school on the Database of Accredited Post Secondary Institutions and Programs or the Federal Student Aid Program.
According to EdChoice, parents whose children attend kindergarten through 12th grade at a private school in Alabama, Illinois, Indiana, Iowa, Louisiana, Minnesota, South Carolina or Wisconsin may be able to deduct some expenses through a school choice tax credit program. Homeschooled students may also be eligible for tax credits or deductions in these states.
End of College Tuition Deductions
College tuition used to be tax-deductible, but it can no longer be claimed on taxes. This change went into effect for the 2018 tax year. There is a possibility that the legislation will extend the deduction, in which case you would need to fill out Form 1040-X (Form 8917) to amend a previous year's tax return.
Tax-Deductible College Expenses
According to the IRS, you can claim the cost of textbooks and equipment – such as a laptop or software program – as long as it is used solely for educational purposes. These supplies do not have to be purchased from the campus bookstore in order to be eligible for deduction. You can also claim some fees if they are required for attendance.
Student Loan Interest Deduction
If your modified adjusted gross income is no more than $80,000 when filing singly or $160,000 when filing jointly, you can deduct the interest accrued on your student loans during the tax year. Up to $2,500 of interest can be deducted, and it is considered an income adjustment rather than an itemized deduction.
Fortunately, you don't have to perform any interest calculations to know how much to subtract from your gross income. Your student loan provider should provide you with Form 1098-E, which will show the exact amount of interest you paid in the tax year.
Continuing Education Required by Employer
According to Brady Ware & Company, continuing education expenses required by your employer no longer qualify as deductions thanks to the 2018 Tax Cuts and Jobs Act. An exception exists for self-employed individuals, who should file Schedule C, Schedule C-EZ, or Schedule F to claim such deductions.
Employer Educational Assistance Program
If you enroll in your employer's educational assistance (EEA) program, up to $5,250 can be excluded from your income. You'll need to pay income and payroll tax on any financial assistance over that amount. Your educational courses do not have to be related to your current job in order for the EEA funds to be considered tax-deductible.
Scholarships and Tax Credits
If you receive a scholarship, attend an eligible educational institution and use the scholarship funds to pay for qualified education expenses (which does not include tuition as of 2018), you can deduct the funds from your taxes.
Other tax credits – such as the American Opportunity Tax Credit – can also be claimed by eligible students. Given the variety of available credits and eligibility requirements, it may be worth working with a tax specialist to ensure you claim the highest deductions possible.
- IRS: American Opportunity Tax Credit
- EdChoice: Is Private School Tuition Tax Deductible?
- IRS: What is an Eligible Educational Institution?
- IRS: Tax Benefits for Education: Information Center
- Federal Student Aid Program: Home
- Database of Accredited Post Secondary Institutions and Programs: Home
- Brady Ware & Company: TCJA Eliminates Work-related Education Deductions
- Internal Revenue Service. "Lifetime Learning Credit." Accessed March 5, 2020.
- Internal Revenue Service. "American Opportunity Tax Credit." Accessed March 5, 2020.
- Internal Revenue Service. "Education Credits: Questions and Answers." Accessed March 5, 2020.
- Internal Revenue Service. "Am I Eligible to Claim an Education Credit?" Accessed March 5, 2020.
- Internal Revenue Service. "Form 1098-T (2020): Tuition Statement," Page 1. Accessed March 6, 2020.
- SEC.gov. "An Introduction to 529 Plans." Accessed March 6, 2020.
Cathy has been writing about finance since 2014 and has been published on sites like The Nest, Bizfluent, Financial Independence Hub, and Credibly. She takes a particular interest in demystifying personal finance questions, like budgeting, tackling debt, and investing for the future.