This time of year, I get a ton of questions about tax breaks for
college costs. Here are the answers to your frequently asked
6 Tax-Smart Ways to Help Your Kids (or Grandkids)
My son started college last year. Can I take a tax break for
paying his tuition?
You could qualify for the American Opportunity tax credit, which
cuts your tax bill by $2,500 if you spend at least $4,000 in
tuition, required fees, books and course materials for the year.
The credit is calculated as 100% of the first $2,000 of tuition and
eligible expenses, plus 25% of the next $2,000. You can get a
partial credit if you pay less than $4,000 of qualified expenses.
This credit first became available in 2009 and has been extended
through 2012. It applies only to expenses incurred during the first
four years of postsecondary education. Because it's a credit, it
lowers your tax bill dollar-for-dollar.
Can anyone qualify for the American Opportunity tax
Your student must be in a program that leads to a degree,
certificate or other recognized credential and enrolled at least
half-time for at least one academic period. You can claim the
credit for each student in your family who qualifies.
To get the full credit, you must have a modified adjusted gross
income of less than $160,000 if you are married filing jointly or
$80,000 if you are single. The size of the credit goes down as
income goes up, and the credit phases out completely at $180,000
(for married couples filing jointly) or $90,000 (for single
filers). For more information, see the
IRS's American Opportunity Tax Credit Q&As
Who can take the credit -- the child or the parents?
The parents can claim the credit for their dependent students.
Students who file their own tax returns and who are not claimed as
a dependent of any other taxpayer can claim the credit
What about divorced parents?
The parent who claims the child as a dependent for tax purposes
can take the credit. See
"Divorced Parents and Education Tax Breaks"
Is there a tax break for graduate school tuition?
Because the American Opportunity credit applies only to the
first four years of post-secondary education, most grad students
won't qualify. But they may qualify for the Lifetime Learning
credit, which reduces their tax bill by up to $2,000 per return.
The credit is calculated as 20% of up to $10,000 of qualified
The Lifetime Learning credit is available for all years of
postsecondary education (although you can't take both the American
Opportunity credit and Lifetime Learning credit in the same year
for the same student). You don't need to be pursuing a degree to
qualify, and you don't have to be enrolled at least half-time
during the academic period. But the classes must be taken at an
educational institution, such as a college, university, vocational
school or other postsecondary institution, that is eligible to
participate in the U.S. Department of Education's student-aid
program. There's no limit to the number of years a Lifetime
Learning credit can be claimed for each student.
The income limits for the Lifetime Learning credit are lower
than they are for the American Opportunity tax credit. To qualify
for the full credit, your modified adjusted gross income must be
less than $100,000 if you are married filing jointly or $50,000 if
you are single. The size of the credit gradually phases out until
your income reaches $120,000 if you are married filing jointly or
$60,000 if you are single.
IRS Publication 970,
Tax Breaks for Education
IRS's Tax Benefits for Education Information