Financial Aid & Tuition

• Financial aid calculator for U.S. students
• Education tax incentives
• International students
• Tuition and fees

Financial Aid and Tuition

Education Tax Incentives for U.S. Students

A variety of money saving tax benefits are available to U.S. taxpayers that may help reduce the overall cost of a college education. The IRS offers various tax savings (deductions or credits) to individuals and families paying higher education expenses.

1. American Opportunity Tax Credit

The American Opportunity Tax Credit may be subtracted from the tax your family owes.

• A maximum of $2,500 may be claimed per eligible student for qualified education expenses paid for the first 4 years of post secondary education.
• Qualified education expenses may include tuition and other related expenses.¹ Books, supplies and equipment need not be purchased from the school to qualify.
• Up to $1,000 may be claimed even if you do not owe any taxes.
• Eligible students must be enrolled at least half-time in a program leading to a degree or other recognized educational credential, and have no felony drug convictions before the end of the tax year.
• You may not claim the American Opportunity credit for any student if you have claimed the Hope Scholarship credit for any student in the same tax year.
2. Hope Scholarship Tax Credit

The Hope Scholarship is a tax credit (not a scholarship) designed to help offset education expenses of students who meet the special rules for the Midwestern disaster areas and any other students claimed on the same tax return. Tax credits are subtracted from the tax your family owes.

• A maximum of $3,600 per eligible student in Midwestern disaster areas² ($1,800 per eligible student non in Midwestern disaster areas) up to the amount of taxes owed, for qualified education expenses paid for the first two years of college.
• At least one student on your tax return must attend an eligible institution within the Midwestern disaster areas².
• Midwestern disaster areas may qualify for expanded education expenses². Non-Midwestern disaster area education expenses include tuition and other related expenses¹ but not room and board.
• Eligible students must be enrolled at least half-time in a degree or certificate program and have no felony drug convictions before the end of the tax year.
• If you claim the Hope Scholarship credit for any student, you may not claim the American Opportunity credit for any other student in the same tax year. You must claim only the Hope Scholarship credit for all students in the same tax year.
3. Lifetime Learning Tax Credit

The Lifetime Learning Tax Credit may be subtracted from the tax your family owes.

• A maximum of $2,000 ($4,000 for Midwestern disaster areas²) may be claimed per tax return, up to the amount of taxes owed, for qualified education expenses paid for all eligible students. There is no limit on the number of years of postsecondary education or number of tax years.
• Qualified education expenses include tuition and other related expenses1 but not room and board. (Midwestern disaster areas may qualify for expanded expenses2.).
• Eligible students must be enrolled in at least one postsecondary education course. The course can be either part of a degree program or taken to acquire or improve job skills.
4. Tuition & Fees Deduction

The Tuition and Fees Deduction reduces the amount of your taxable income.

• A maximum of $4,000 paid for tuition and fees may be deducted as an adjustment to income even if you do not itemize deductions.
• Eligible education expenses include tuition and other related expenses¹. Midwestern disaster areas may qualify for an expanded list of educational expenses².
• Eligible students must be enrolled in one or more courses at an eligible educational institution and must have either a high school diploma or GED.
5. Student Loan Interest Deduction

You can deduct interest paid on student loans to reduce your amount of taxable income.

• A maximum of $2,500 may be deducted each year even if you do not itemize deductions.
• To be eligible, the loans(s) must have been borrowed to pay qualified educational expenses for a student who was enrolled at least half-time in a postsecondary degree or certificate program.
• Qualified education expenses may include tuition, fees, room & board, books, supplies, equipment, transportation and other necessary expenses.
• In addition to simple interest on the loan, the following also may be considered student loan interest: loan origination fees, capitalized interest, interest on revolving lines of credit used to pay qualified educational expenses, interest on refinanced student loans, and voluntary interest payments.
6. When to claim what?

Program specifics vary, but in general:

• You may take only one tax credit for each eligible student per tax year.
• The student must be you, your spouse or your dependent.
• More than one benefit may be claimed in the same year if you are using a different student's expenses to determine the credit (e.g., the Hope Scholarship can be claimed for your college freshman and the Lifetime Learning credit may be claimed for your college junior) except for the American Opportunity and Hope Scholarship tax credits. You may claim either one or the other in any one tax year.
• You may take a tax-free distribution form a Qualified Tuition Program or Coverdell Education Savings Account and also claim either the Hope Scholarship credit or American Opportunity credit, Lifetime Learning credit, or Tuition and Fees Deduction as long as the same education expenses are not used to qualify for each benefit and you do not exceed the maximum Lifetime Learning benefit. You will receive a 1098-T from the college or university that your student attends. The 1098-T will specify the amount of eligible expenses that may be used when calculating your tax credits. You may not claim expenses that were paid with tax-free scholarship, grants or other educational assistance OR expenses used to claim a different tax benefit or deduction.

Note: All information on this page is believed to be correct as of January 2010. It provides general information and should be used for comparison purposes only. You may wish to talk to a tax advisor for help in determining which tax benefit is best for you. Also, IRS Publication 970 has more specific information.

---

¹Related education expenses may include student activity fees and expenses for course-related books, supplies, and equipment, but only if these fees must be paid directly to the college or university as a condition of enrollment or attendance.

²Students attending an eligible educational institution in the Midwestern disaster areas of Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin may qualify for special Midwestern disaster area benefits for the Hope or Lifetime Learning Credit or the Tuition and Fees Deduction.

The definition of qualified education expenses is also expanded for students in Midwestern disaster areas. In addition to tuition and fees required for enrollment, qualified education expenses for student in the above areas include the following:

• Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution
• For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution.
• For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the allowance for room & board that was included in the cost of attendance or the actual amount charged if the student is residing in housing owned or operated by the institution.

back to top