Tuition and Taxes: 4 Things Every Student Needs to Know at Tax Time

couple can't afford socks because of taxes

The good news is you get a few extra days to do your taxes in 2016 – the filing deadline has been pushed back to April 18. The bad news is that you still have to fill out all those boring and confusing forms. But, if you’re a college student or a recent graduate, you might have an added incentive to start working on your taxes early, since several expenses associated with higher education can be deducted on your return. Here are four facts every student needs to consider at tax time:

Know Which Expenses Qualify

Tuition and other specific educational fees can reduce your taxable income by up to $4,0001 , even if you choose not to itemize your tax return. Eligible tuition expenses are defined as funds paid to attend any postsecondary institution that is eligible to participate in a student aid program administered by the U. S. Department of Education (which covers virtually all accredited public, private, and proprietary schools, including Ashford University). Other eligible expenses include student activity fees, course-related books, supplies, and equipment. To be eligible for deduction, the expenses must be paid directly to the school and must be a condition of enrollment or attendance.

Credit Where Credit Is Due

There are two education-related tax credits that students can claim on their tax returns: the American Opportunity Credit and the Lifetime Learning Credit. You can only claim one of these credits (and you may not be eligible for either credit), so be sure you understand the eligibility requirements for both credits. In general, students may be eligible for the American Opportunity Credit if they are carrying at least half of the full-time workload for a degree-seeking program and their modified adjusted gross income is less than $90,000 (or $180,000 for students who are married and filing jointly). The Lifetime Learning Credit is similar but is available to students whose modified adjusted gross income is less than $65,000 ($130,000 for joint filers). Also, the Lifetime Learning Credit does not require students to be in a degree-seeking program.

Take an Interest in Your Interest

Nobody likes to pay student loans, but those expenses could help you out at tax time. You might be eligible for a sizeable deduction if you paid interest on a student loan and your modified adjusted gross income is less than $80,000 (or $160,000 if married and filing jointly). Loan origination fees and other expenses associated with student loans may also qualify for the student loan interest deduction.

What about Scholarships and Grants?

This point may sound counterintuitive, but there may by some advantages to adding tax-free scholarships or fellowship grants to your income on your tax return. Yes, it will raise your taxable income, but it could also increase your education credit and ultimately reduce your tax liability.

There are restrictions and requirements associated with all of the ideas offered in this post, so be sure you understand the ramifications before you send off your tax return. For a complete overview of taxes and educational expenses, check out Publication 970 Tax Benefits for Education from the IRS.


Written by Erik Siwak, Communications Manager for Bridgepoint Education

“Tuition and Fees Deduction,” Publication 970 Tax Benefits for Education, Internal Revenue Service,, January 29, 2016.

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