In the current economic climate – with increasing tuition, burgeoning student loan debt, and rising living costs – managing finances as a student can be challenging. Potential tax benefits, including certain education-related tax credits and deductions, may offer some financial relief for eligible students during their educational journey.
Note: The information provided here is a general overview of potential education-related tax benefits and is not intended as legal or tax advice. Tax laws and benefits can vary widely based on individual circumstances. Consult a qualified tax professional in your state for advice tailored to your specific financial situation.
When Does Tax Filing Start?
Here’s a quick timeline for the 2024 tax season.
- January 12: IRS Free File opens for qualified taxpayers (any taxpayer or family with Adjusted Gross Income of $79,000 or less in 2023). Participating IRS Free File software companies begin accepting completed tax returns, holding them until electronic filing begins.
- January 29: Filing season start date for individual returns.
- April 15: Due date for filing a tax return or to request an extension for most of the U.S.
- April 17: Due date for Maine and Massachusetts residents.
- October 15: Due date for those who filed an extension.
See also: Complete Listing of U.S. State Dept. of Revenue Websites
Understanding Tax Credits and Deductions
For students, there are generally two types of tax benefits that may be available: tax credits and deductions. Here’s a brief explanation of how these benefits might work in certain situations.
A tax credit reduces the amount of money you owe in taxes, aka your tax liability. Some tax credits are refundable, meaning that taxpayers get money back from the government if their credit is larger than their tax liability.
A deduction reduces a taxpayer’s taxable income, in turn reducing the amount of taxes they owe. Some education-related expenses may be deductible while others are not.
Credits and deductions can be complex. If you have questions, you may consider seeking guidance from a licensed tax professional.
Key Tax Benefits for Students
American Opportunity Tax Credit (AOTC)
This tax credit provides up to $2,500 per eligible student per year for the first four years of higher education. This is a partially refundable tax credit, which pays up to $1,000 if the credit exceeds the tax liability.
The AOTC has a number of eligibility requirements, including income limits. Speak with a tax professional about whether you are eligible for this student tax benefit.
More info:
- IRS: American Opportunity Tax Credit
- Federal Student Aid: Tax Benefits for Higher Education
Lifetime Learning Credit (LLC)
The non-refundable LLC provides 20% of the first $10,000 – up to $2,000 – of qualified education expenses per year. Expenses for college and university, vocational training, professional degree courses, and other courses to acquire or improve job skills may be eligible. There is no limit to the number of years the LLC can be claimed.
Like the AOTC, the LLC has several eligibility requirements, including income limits. Speak with a tax professional about whether you are eligible to claim it.
More info:
- IRS: Lifetime Learning Credit
- Federal Student Aid: Tax Benefits for Higher Education
How are the AOTC and the LLC different? Learn more about the important differences between these two education-related tax benefits at IRS Education Credits: Questions and Answers.
Student Loan Interest Deduction
Deduct up to $2,500 of qualified student loan interest paid during the past year to reduce your taxable income.
Students must meet several eligibility requirements to claim this deduction. Speak with a tax professional about whether you can deduct your student loan interest.
More info:
- IRS: Topic no. 456, Student loan interest deduction
Check out this IRS tool that helps you determine whether your scholarship, grant, and/or fellowship should be included in your income on your return.
Additional Resources
Check out these resources to learn more about student tax benefits and get help with your tax return.
IRS Tax Information for Students – Start Here
- IRS: Tax information for students
- IRS: Interactive Tax Assistant – to determine tax liability on scholarships, fellowships, and education grants
Tax Benefits for Education – Find More Official IRS Resources
College students, parents of dependents who are students, and lifelong learners can find lots of valuable information on education-related credits, deductions, scholarships and fellowships, and exclusions from income, on this IRS webpage.
Free File Alliance – Free Guided Tax Preparation and Filing
The nonprofit Free File Alliance has partnered with the IRS to help eligible taxpayers, including many students, prepare and file a federal tax return online for free through a network of trusted partners. Some trusted partners in the Free File Alliance also offer assistance with state tax returns.
Who is eligible for Free File Alliance? Taxpayers with an Adjusted Gross Income (AGI; that is, total income minus deductions and adjustments) of $79,000 or less are eligible for free guided preparation and filing through Free File Alliance. Taxpayers with an AGI above $79,000 have access to the fillable forms without guided preparation.
- IRS Free File provides an overview, plus a tool to help you identify which trusted partner at Free File Alliance is a good fit for you
- Free File Alliance home and helpful FAQs page
Explore Tax Benefits for Students
Explore all the education-related tax benefits available to you based on your eligibility and be sure to speak with a tax professional for personalized advice – every individual’s tax situation is unique. Being a student can be challenging financially, but tax benefits for students may help reduce your tax liability and ease the financial burden of education.
