3 Tax Breaks for Students to Lower Tuition Expenses | The Treasury of the People
Updated: Jul 14, 2022
The cost of college tuition is rising every year, making it difficult for many students to afford their education. However, there are a few tax breaks that can help lower the cost of tuition. Here are three tax breaks for students to help reduce their tuition expenses.
The American opportunity tax credit (AOTC) is a great way to offset the cost of higher education for eligible students. The credit covers the first four years of undergraduate study and can be worth $2,500 per student each year. Suppose the AOTC brings your tax liability down to zero. In that case, you may even be able to get up to $1,000 of the remaining credit refunded.
To calculate the credit, simply take 100% of the first $2,000 of qualified education expenses paid for each eligible student and 25% of the next $2,000 paid for that student. This makes the AOTC a great way to reduce the overall cost of a college education.
The lifetime learning credit (LLC) can help you pay for qualified tuition and related expenses for eligible students enrolled in an eligible educational institution. This credit is worth up to $2,000 per tax return, and there is no limit on the number of years you can claim it. So whether you're looking to improve your job skills or pursue a degree, the LLC can give you a hand.
The interest you pay on a qualified student loan is tax-deductible. You can deduct up to $2,500 in interest paid per year or the amount of interest you actually paid during the year—whichever is less. This deduction phases out gradually as your modified adjusted gross income (MAGI) reaches the annual limit for your filing status.
You don't need to itemize your deductions to claim this deduction—it's an adjustment to income.
If you are a student, be sure to take advantage of these tax breaks to help lower your tuition expenses. For more information on these and other tax breaks, speak with a tax professional or visit the IRS website.