American Opportunity Tax Credit (AOTC)

This credit offsets what you pay for the first four years of higher education by reducing the amount of income tax you pay. In addition, the credit is partially refundable. This credit provides up to $2,500 per student and up to 40 percent of the credit may be refundable. Graduate students are not eligible for the (AOTC).

Eligibility Requirements

The credit is available to individuals whose modified adjusted gross income (MAGI) is $90,000 or less, or $180,000 or less for married couples filing jointly.* The amount you are eligible for varies depending on your income, how much you spent on higher education expenses, and how many eligible students are in your family.

*2017 amounts shown – this is updated every tax year by the IRS.

You can use this credit to offset payment of qualified educational expenses minus the amount of scholarships, grants, and tax-free employer-provided assistance received during the tax year for yourself, your spouse, or someone you claim as a dependent on your tax return.

Qualified Educational Expenses at UChicago include tuition, course fees, study abroad program fees and the student life fee. All other fees are not considered qualified expenses.

The student also must have been enrolled at least half-time for at least one academic period that began during the tax year (or the first 3 months of the subsequent tax year if the qualified expenses were paid in the previous tax year) in an eligible program leading to a degree.

The credit is only available for the first four years of post-secondary education (undergraduate education). If a student progresses from an undergraduate to a graduate program during the tax year and has not claimed the American Opportunity Tax Credit for more than four taxable years, the student can claim the American Opportunity Tax Credit for the entire taxable year.

You must file a federal income tax return to get the credit (even if you aren’t required to file a return). If you are claimed as a dependent on someone’s tax return, only the person who claims you can apply for the credit. If you are not claimed as a dependent on someone else’s return, were under 24-years-old at the end of the tax year and your earned income was less than half of your support, you can claim the credit to reduce any tax you owe. Forty percent of the credit is refundable.

You must have a taxpayer identification number (TIN) by the due date of your return (including extensions) in order to claim the American opportunity credit on either your original or an amended return.

To claim any higher education tax credit, you must report the amount of your qualified expenses (minus the amount of certain scholarships, grants, and tax-free employer-provided assistance received) on IRS Form 8863 – Education Credits with the form 1098-T.  For further instructions review the IRS Instructions for the form 1098-T.

Lifetime Learning Credit

Unlike other credits, the Lifetime Learning Credit is available for all types of post-secondary education. This credit may be particularly helpful to graduate students.

This credit provides up to $2,000 per tax return (not per student). Unlike the American Opportunity Tax Credit, this credit is non-refundable so the maximum credit is limited to the amount of tax you owe.

Eligibility Requirements

You must have a modified adjusted gross income (MAGI) of less than $66,000 (for married couples filing a joint return, MAGI must be less than $132,000). The amount of your lifetime learning credit is gradually reduced (phased out) if your MAGI is between $55,000 and $66,000 ($111,000 and $132,000 if you file a joint return).*

*2017 amounts shown this is updated every tax year by the IRS.

This credit can be used to offset what you paid for qualified educational expenses minus the amount of certain scholarships, grants, and tax-free employer-provided assistance received during 2017 for yourself, your spouse, or someone you claim as a dependent on your tax return.

Qualified Educational Expenses at UChicago include tuition, course fees, study abroad program fees and the student life fee. All other fees are not considered qualified expenses.

You must file a federal income tax return and have some income tax liability to get the credit. If you are claimed as a dependent on someone’s tax return, only the person who claims you can receive the credit.

If you claim the American Opportunity credit for one or more students in your family, you can’t use their expenses to claim the Lifetime Learning Credit.

To claim any higher education tax credit, you must report the amount of your qualified expenses minus the amount of certain scholarships, grants, and tax-free employer-provided assistance received on IRS Form 8863 – Education Credits with the form 1098-T.  For further instructions review the IRS Instructions for the form 1098-T.

Tuition and Fee Deduction

The Tuition and Fees Deduction expired at the end of the 2017 Tax Year and was not renewed. You may claim this deduction for previous years, however, it is not available for the 2018 Tax Year.

This deduction can reduce your taxable income by as much as $4,000 and may benefit you if you are not eligible for any of the tax credits. It is an adjustment to your income so you can claim this deduction even if you do not itemize deductions on Schedule A of Form 1040.

Eligibility Requirements

Taxpayers with a modified adjusted gross income (MAGI) of less than $80,000 ($160,000 if married and filing jointly) may be eligible for a deduction of up to $4,000.*

*2016 amounts shown this is updated every tax year by the IRS.

The amount of the Tuition and Fees Deduction you are eligible for also depends on the amount of qualified tuition and related expenses paid for eligible students. You can use the deduction to offset what you paid for tuition and fees, as well as other expenses required by the institution for books, supplies and equipment (minus the amount of certain scholarships, grants, and tax-free employer-provided assistance you received) during the tax year for yourself, your spouse, or someone you claim as a dependent on your tax return. The expenses must have been for a student enrolled in one or more courses at an eligible higher education institution (virtually all accredited, public, nonprofit, and proprietary post secondary institutions).

You can’t claim both an education credit and the Tuition and Fees Deduction for the same student for the same year, but you can take the deduction for one student and a credit for another.

You can’t take this deduction if you deduct tuition and fees expenses under any other provision of the law (for example, as a business expense).

Calculate your Tuition and Fees Deduction with IRS Form 8917 – Tuition and Fees Deduction with the form 1098-T.

Student Loan Interest Deduction

This deduction allows you to deduct interest paid on student loans for yourself, your spouse, or your dependents. It can reduce your taxable income by as much as $2,500. The amount of the Student Loan Interest Deduction you are eligible for depends on the amount of interest paid and your income. It is an adjustment to your income so you can claim this deduction even if you do not itemize deductions on Schedule A of Form 1040.

Eligibility Requirements

Your modified adjusted gross income (MAGI) must be less than $80,000 (less than $160,000 if married and filing a joint return) to qualify for this deduction.

The amount of your student loan interest deduction is gradually reduced (phased out) if your MAGI is between $65,000 and $80,000 ($130,000 and $160,000 if you file a joint return).*

*2016 amounts shown this is updated every tax year by the IRS.

Qualified student loans must have been used to fund educational expenses such as tuition, room and board, fees, and books for a student enrolled at least half-time and pursuing a degree, certificate, or similar program at an eligible institution (virtually all accredited, public, nonprofit, and proprietary post secondary institutions).

You can’t claim this deduction if you are married and file separately or if another person can claim you as a dependent on his or her tax return.

Figure your Student Loan Interest Deduction using the Student Loan Interest Deduction Worksheet 4-1 .  Lenders whom you paid more than $600 in interest will provide you with a 1098-E Student Loan Interest Statement.