Tax Relief Programs

Tax Benefits for Education

The Taxpayer Relief Act of 1997 encourages education by providing tax benefits to students and their families. Qualified taxpayers may be eligible to claim a tax credit on their federal income taxes for tuition paid or may take a deduction for interest paid on educational loans.

The National Association of Student Financial Aid Administrators (NASFAA) has published a Parent and Student Guide to Federal Tax Benefits for Tuition and Fees. The guide includes information on the Hope Scholarship (see below) and Lifetime Learning tax credits, provides guidance on understanding the tuition and fees tax deduction, and gives links to IRS publications that address these topics. It is available in HTML and PDF versions. Please note that this document is intended to provide general guidance only.  

Hope Scholarship Tax Credit

• For parents or students who pay college tuition for at least half-time attendance.
• For the parent to claim the credit, the student must be his or her dependent, under age 24, and attending school full-time at least 5 months of the year.
• Tuition paid in the current year for classes that started in the current year will qualify for the credit.
• Adjusted Gross Income limits change each year. See IRS website for more information. 

Lifetime Learning Tax Credit

• Amount of the credit is subtracted from the taxes your family owes, rather than reducing taxable income like a tax deduction.
• The amount of qualified education expenses you can take into account when figuring your Lifetime Learning credit is $10,000. The maximum credit equal 20% of these qualified expenses, making the maximum credit $2,000.
• Adjusted Gross Income limits change each year. See IRS website for more information.

Interest Paid on Student Loans Tax Deduction

• Interest paid on a qualified educational loan is deductible from taxpayer income.
• Both students and parents are eligible.
• It is not a credit to reduce tax, but is a deduction from gross income.
• Available even if the taxpayer does not itemize deductions on Schedule A.
• Adjusted Gross Income limits change each year. See IRS website for more information.