Council on Postsecondary Education
TAX CREDITS, DEDUCTIONS HELP LOWER COLLEGE COSTS
Kentuckians may be able to take advantage of several higher education credits and deductions when filing their federal and state income taxes this spring. In some cases, taxpayers can save thousands of dollars.
The major federal credits and deductions include:
- American Opportunity Credit, which allows taxpayers to receive credit for up to $2,500 for qualified expenses paid for each eligible student. It can only be claimed for students in their first four years of higher education.
- Lifetime Learning Credit, which provides up to a $2,000 credit for qualified expenses paid for each eligible student. It can be claimed for any year of higher education.
- Student Loan Interest Deduction, which allows people repaying student loans to deduct up to $2,500 in interest from their income.
- Tuition and Fees Deduction, which lets taxpayers deduct up to $4,000 from their income for qualified higher education expenses for themselves or a dependent.
In addition, Kentuckians may use the Kentucky Tuition Tax Credit (Kentucky Form 8863-K) to deduct 25 percent of their Lifetime Learning Credit for undergraduate expenses at an eligible Kentucky college or university.
Each year, college and universities are required to send students an IRS Form 1098-T that provides information on qualifying education expenses. Students taking credit classes at least half-time during one semester typically receive the form.
According to data from the U.S. Department of Treasury for tax year 2011, it is estimated that 107,000 Kentucky families will receive approximately $212 million in tax credits alone from the American Opportunity Tax Credit, an average of almost $2,000 per return.
Colleges and universities do not give tax advice, so those interested in taking advantage of these education benefits should contact the IRS at 1-800-829-1040 or online at www.irs.gov (Publication 970, Tax Benefits for Higher Education, Forms 8863 and 8917) or consult a tax expert for more information.
Kentucky’s postsecondary and adult education system is improving the economic vitality of the Commonwealth and the lives of Kentuckians. By raising educational attainment, Kentucky will attract higher wage and knowledge-based business and industry. The overall quality of life for Kentuckians will also improve with higher incomes and levels of employment, better health, less obesity, more volunteerism, and lower crime and public assistance rates.