Education Tax Benefits

Millions of workers lost their jobs during the pandemic. Some others quit their jobs. The stress and change brought by COVID-19 made them reflect on their careers and ponder how they want to spend the rest of their working years. Whether they quit or not, thousands of adults have been preparing for new career opportunities by enrolling in education of one type or another: college, professional certifications, graduate school, etc.

Investing in education to meet new challenges is a smart move. But it can be expensive. Good news – there are two education tax benefits available to eligible taxpayers that can reduce those out-of-pocket education expenses. The IRS has all the details here at their website It’s a lot to read, so here are a couple of highlights:

  • Education Tax Credits

An education credit, either the American Opportunity Tax Credit or the Lifetime Learning Credit, helps to defray the cost of higher education with a dollar-for-dollar federal tax liability reduction. The credit is refundable, so it can reduce your tax below zero. To take the tax credit, you, your spouse, or your dependent must incur and pay qualified expenses for higher education at an eligible education institution. Qualified expenses include tuition, fees, and other related expense for an eligible student required for enrollment or attendance.

  • Student Loan Interest Deduction

Generally, personal interest is not deductible, other than for a home mortgage. However, if your modified adjusted gross income (MAGI) is less than $85,000 ($170,000 if filing a joint return), there is a special deduction allowed for paying interest on a student loan used for qualified higher education expenses. The student loan interest deduction can reduce the amount of your income subject to tax by up to $2,500. The amount of actual tax savings will depend on your marginal income tax bracket.

Stressful times, like the pandemic, often make people reflect on the course of their lives, including their career. That reflection can lead to enrolling in additional training or education. If you are deciding whether to invest in education, due to COVID-19 or another reason, you need to know the overall cost. Two education tax benefits can, depending on your situation, reduce your federal income tax liability and defray your out-of-pocket education expenses. 

Want more details? Check out the IRS website at

Education and Your Taxes

School started only a few weeks ago. By now, parents and students have spent what seems like zillions of dollars on supplies, tuition, and books. Sure, all that spending is an investment in the future. But is there a way to see some return on all that spending before graduation?


Qualified educational expenses could be eligible for income tax deductions or credits. That could mean hundreds or thousands of dollars back in your tax refund next year. Just how much you can claim depends on your situation. Here’s how it works:


  1. Education Credits

Qualified education expenses paid by or on behalf of an eligible student to an eligible school for higher education could be claimed as a dollar-for-dollar credit against your tax liability. That’s a lot of “qualifieds” and “eligibles” but it’s worth checking out. There are two education credits: the American opportunity tax credit and the lifetime learning credit. If you’re eligible to claim both credits for the same student in the same year, you can only choose one.


  1. Tuition and Fees Deduction

Qualified higher education expenses paid during the year for yourself, your spouse or your dependent could be tax deductible. If it produces a lower tax liability, you may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. Remember, no claiming the tuition and fees deduction and an education credit for the same expense.


  1. Business Deduction for Education Expenses

Employees who itemize deductions (i.e., Schedule A) may be able to deduct expenses paid for work-related education. Work-related education expenses may also qualify for one of the credits described above. Self-employed individuals can deduct work-related education directly from self-employment income, reducing both income tax and self-employment tax.


  1. Qualified Student Loan Interest Deduction

Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, if you qualify based on your income and filing status, there is a special deduction allowed for paying interest on a student loan used for higher education. This deduction can reduce your taxable income subject by up to $2,500.
Paying education expenses can take a bite out of your budget. Check out the IRS website at  to see if you qualify to get some of that money back in your tax refund next year.