IR-2017-163, Sept. 27, 2017
WASHINGTON – The Internal Revenue Service today reminded parents and students that there are many tax benefits available to them, and the easiest way to learn more about them is through the education resources available on IRS.gov.
Besides tax credits such as the American Opportunity Tax Credit and the Lifetime Learning Credit, there are other education-related tax benefits that can help reduce a taxpayer’s tax liability. Savings plans, such as 529 plans, also offer tax-free ways to save for a student’s qualified education expenses.
Student Loan Interest Deduction
If a taxpayer’s modified adjusted gross income (MAGI) in 2017 is less than $80,000 ($165,000 if filing a joint return), there is a special deduction allowed for paying interest on a qualified student loan used for higher education. This may include both required and voluntary interest payments. Eligible taxpayers can claim this deduction even if they don’t itemize their deductions on Form 1040 Schedule A.
- Qualified Student Loan is a loan:
- Taken out solely to pay qualified education expenses that were for the taxpayer, their spouse or a person who was their dependent when they took out the loan.
- Paid or incurred within a reasonable period of time before or after the taxpayer took out the loan.
- For education provided during an academic period for an eligible student.
- From someone other than a relative.
- That is not taken from a qualified employer plan.
- Qualified Education Expenses include amounts paid for the following items:
- Tuition and fees.
- Room and board.
- Books, supplies and equipment.
- Other necessary expenses, such as transportation.
Business Deduction for Work-Related Education
A taxpayer who is an employee and can itemize their deductions may be able to claim a deduction for expenses they paid for work-related education.
For self-employed workers, deduct expenses for qualifying work-related education directly from self-employment income. This reduces the amount of income subject to both income tax and self-employment tax.
To claim a business deduction for work-related education, the taxpayer must:
- Be working.
- Itemize their deductions on Schedule A (Form 1040 or 1040NR), if they are an employee.
- File Schedule C, Schedule C-EZ or Schedule F if the taxpayer is self-employed.
- Have expenses for education that meet the requirements for qualifying work-related education.
Qualified Tuition Programs (529 Plans)
States may establish and maintain programs that allow taxpayers to either prepay or contribute to an account for paying a student’s qualified education expenses at a postsecondary institution. No tax is due on a distribution from a qualified tuition program unless the amount distributed is greater than the beneficiary’s adjusted qualified education expenses.
Qualified expenses include:
- Required tuition and fees.
- Books, supplies and equipment.
- Computer or peripheral equipment, computer software and internet access and related services.
- Room and board for those who qualify as at least half-time students.
Additional IRS Resources:
- 529 Plans: Questions and Answers
- Tax Benefit for Disability: Section 529A ABLE Accounts
- Education Credits
- Publication 970, Tax Benefits for Education
- Tax Information for Students