What college expenses are tax deductible for parents?

College Expenses Qualifying for Tax Deductions

The Internal Revenue Service (IRS) provides guidelines for tax deductions and credits related to college expenses. Parents can take advantage of these benefits for expenses they pay for themselves, their spouse, or dependents. The primary tax benefits available are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).

American Opportunity Tax Credit (AOTC)

- Eligible Expenses:

 - Tuition

 - Required enrollment fees

 - Course materials (books, supplies, and equipment needed for attendance or study)

- Non-Qualified Expenses:

 - Room and board

 - Medical expenses

 - Student health fees

 - Insurance

 - Transportation

 - Personal, living, or family expenses

- Additional Information:

 - The AOTC is available for the first four years of post-secondary education.

 - The maximum credit is $2,500 per eligible student per year.

 - Up to 40% of the credit is refundable, meaning you could receive up to $1,000 back even if you owe no taxes.

 - The student must be enrolled at least half-time for at least one academic period beginning in the tax year.

 - Expenses for course-related books, supplies, and equipment are eligible even if not purchased from the educational institution.

Lifetime Learning Credit (LLC)

- Eligible Expenses:

 - Tuition

 - Fees required for enrollment or attendance at an eligible educational institution

 - Expenses related to courses to acquire or improve job skills

- Non-Qualified Expenses:

 - Similar to AOTC, expenses for room and board, transportation, and personal living are not qualified.

- Additional Information:

 - The LLC is available for all years of post-secondary education and for courses to acquire or improve job skills.

 - The credit is worth up to $2,000 per tax return (not per student).

 - The credit is non-refundable, which means it can only reduce the tax you owe to zero and not provide a refund.

 - There is no limit on the number of years you can claim the LLC.

Additional Considerations

- To claim either the AOTC or LLC, taxpayers must receive Form 1098-T, Tuition Statement, from the educational institution.

- Taxpayers must complete Form 8863, Education Credits, and attach it to their tax return.

- The credits cannot be claimed for the same student's expenses in the same tax year.

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Sources:

Education credits: questions and answers | Internal Revenue Service 2024-08-03

Tax benefits for education: Information center - Internal Revenue Service 2024-08-02

Are You Paying College Expenses - Internal Revenue Service 2024-08-03

Education Credits AOTC LLC | Internal Revenue Service 2024-08-03

Qualified Ed Expenses | Internal Revenue Service 2024-08-02

Publication 970 (2023), Tax Benefits for Education | Internal Revenue ... 2024-08-03

AOTC | Internal Revenue Service 2024-08-03

LLC | Internal Revenue Service 2024-08-03

College students should study up on these two tax credits 2024-08-04

for Education Benefits - Internal Revenue Service 2024-08-02