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The benefit of being a college student when it comes to filing taxes

By Catherine Mueller

April 03, 2017

Among the benefits of being a college student are the tax credits and deductions that come along with that status.

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As a financial aid professional, you may want to make sure that your students and their parents are aware of the benefits. Also, you or another office on your campus may need to prepare the 1098-T form for your students. If you are an eligible educational institution that received payments for qualified tuition and related expenses from a student, you must file for each student you enroll and for whom a reportable transaction is made. More information about preparing the 1098-T is online on the IRS website.

Tax credits
Students or their parents can elect one of the credits below per student per tax year. (There are income limitations.)

• American Opportunity Credit
• For expenses incurred during the first four years of postsecondary education.
• Up to $2,500 for qualified education expenses paid for each eligible student.
• Student must be pursuing an undergraduate degree or other recognized education credential.
• Student must be enrolled at least half-time for at least one academic period during the tax year.
• Tuition and fees required for enrollment are included, as well as course-related books, supplies, and equipment, even if you did not purchase them from the school.
• The eligible student may be the taxpayer, his or her spouse, or a dependent claimed as an exemption on the tax return.
• Lifetime Learning Tax Credit
• You may claim a tax credit (up to $2,000 for most families) for education expenses incurred during all years of postsecondary education.
• Eligible students must be enrolled in at least one postsecondary course (undergraduate or graduate), or courses to acquire or improve job skills
• Tuition and related fees are included, but excluded are room, board, books, supplies and other living expenses, unless you were required to pay the fees to the school as a condition of enrollment or attendance.
• The student must be the taxpayer, the taxpayer's spouse, or a dependent for whom the taxpayer claims an exemption on their return.
• This credit is figured on the basis of one credit per tax return, regardless of how many dependent students are involved.
• To assist with determining your credit, you should receive a 1098-T from the postsecondary school.

Tax deductions

• College Tuition and Fees Deduction
• You can reduce your taxable income by up to $4,000 for undergraduate and graduate expenses, depending on your modified adjusted gross income.
• Student Loan Interest Deduction
• Allows eligible student loan borrowers to deduct up to $2,500 of interest paid.
• Loan must have been used to pay for tuition and/or other higher education expenses, which may include fees, room & board, books, supplies, or equipment.
• Student must have been enrolled at least half-time in a program that led to a degree, certificate or other recognized educational credential.

Mapping Your Future offers the above tax information as a resource and a convenience to you. We review our site content regularly to ensure content is correct and up-to-date; however, you should not consider us to be qualified tax advisors. If you are uncertain about your rights and responsibilities, contact a qualified tax advisor or visit the Internal Revenue Service (IRS) website. IRS Publication 970 outlines the education tax benefits.