Getting a good education is one of the best investments you can make in yourself and/or your kids.
Many careers (especially the higher paying ones) require job seekers have college degrees in order to get hired. College can also be an important part of your formative years; in school, you may find out what you want to do and make life-long connections.
However, getting that college education is not cheap. Tuition fees for college can cost tens of thousands of dollars. And some of the top 4-year colleges can cost $50,000 – $70,000 per year.
If you are paying college tuition for yourself or your kids, you’d like to save as much as possible. Which leads to a common question that people have… “is college tuition tax-deductible?” Get the details below on whether you can save on your taxes by deducting college expenses.
Is College Tuition Tax-Deductible?
The short answer is it depends.
Yes, college tuition fees can be tax-deductible. However, the tax year is a big factor in determining whether or not you can deduct those costs are not.
Also, while college tuition fees can be tax-deductible, there are also tax credits for them.
For 2019 and 2020, taxpayers who paid qualified college tuition and fees were eligible for a deduction. However, the college tuition tax deduction is not available for the 2021 tax year.
The tuition and fee deduction expired on December 31, 2020. But taxpayers who paid eligible tuition and fees in 2018, 2019, and 2020 could claim a maximum deduction of $4,000.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 eliminated the deduction for tuition and fees. Section 104 of House Bill 133 eliminated the tuition deduction for the 2021 tax year. This amendment increased the Lifetime Learning Credit’s income limits.
You can file an amended return if you have already filed your tax return for 2019 or 2020 but now wish to claim the Tuition and Fees Deduction. Form 1040-X is required by the IRS.
If you amend your 2019 or 2020 tax returns, you could reduce your taxable income by $4,000 or $2,000. The deduction depends on your modified adjusted gross income (MAGI) and filing status. To claim this deduction, you must fill out Form 8917.
How To Qualify For College Tax Credits
You could qualify for this tax credit if you paid for college expenses for yourself, one of your dependents (as long as no one else claims the dependent on their taxes), or your spouse. Tuition and other fees that students must pay to attend a particular institution are qualified education expenses.
However, you cannot deduct expenses paid through a scholarship or other tax-free award.
Students in college (or their parents and guardians) may also qualify for the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
The AOTC allows parents (and non-dependent students) to reduce their tax liability by up to $2,500 for four years. As a refundable tax credit, it can increase your tax refund even if it reduces your tax liability to a negative amount.
On the other hand, the LLC is a nonrefundable tax credit. You cannot receive a refund if the credit reduces your tax liability below zero. The LLC is advantageous because parents and students can claim the credit when paying for undergraduate, graduate, or technical school. In addition, there is no rule stating that it can only be claimed for a limited number of years.
Although the college tuition tax deduction is no longer available for the 2021 tax year, there are still tax credits that you may be eligible for your college tuition fees.