Education-Related Tax Deductions

Some of your educational expenses as well as interest on student loans may be tax deductible.

Deduction for Student Loan Interest

Each year you may be eligible to deduct up to $2,500 in student loan interest. If you are a taxpayer filing as single, head of household or a qualifying widow, the full $2,500 deduction is allowed for gross income equal to or below $50,000. For gross income between $50,000 and $65,000, the deduction amount is reduced and if you earn more than $65,000, you are ineligible.

If you are a taxpayer who is married filing jointly, you are allowed to deduct the full $2,500 only when your gross income is $100,000 or less. Your deduction is reduced if your gross income is between $100,000 and $130,000, and you are ineligible if you earn more than $130,000. Taxpayers who are married but file separate returns are not eligible.

In addition, if you are claimed as a dependent, or if the loan is from a related party or a qualified employer plan, you are not eligible for the deduction. Visit www.irs.gov for more detailed qualification information.

Lifetime Learning Tax Credit

You may be able to claim a federal Lifetime Learning Tax Credit of up to $2,000 for qualified education expenses each year. Qualified expenses include monies paid for education either directly by you or from borrowed funds. This tax credit reduces the amount of income tax you may have to pay and there is no limit on the number of years you can claim it.

However, if your gross income is greater than $53,000 ($107,000 of you are married and file a joint return), you are ineligible. Also, you are ineligible if you are married and file separate returns or if you are listed as a dependent on another person's tax return. For more detailed information, www.irs.gov.

What types of educational expenses are deductible?

Deductible educational expenses include amounts spent for tuition, books, supplies, laboratory fees and similar items. They also include the cost of correspondence courses, as well as formal training and research you do as part of an educational program. Transportation and travel expenses to attend qualified educational activities may also be deductible. For more information, visit the IRS website at www.irs.gov.