Education Tax Deductions & Tax Credits

Tax credits, deductions and savings plans can help taxpayers with their expenses for higher education.

  • A tax credit reduces the amount of income tax you may have to pay.
  • A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay.
  • Certain savings plans allow the accumulated earnings to grow tax-free until money is taken out (known as a distribution), or allow the distribution to be tax-free, or both.
  • An exclusion from income means that you won’t have to pay income tax on the benefit you’re receiving, but you also won’t be able to use that same tax-free benefit for a deduction or credit.

For college students, sometimes the parents may get the tax benefit, and other times the student may get the tax benefit.  Often this can be worked to obtain the highest tax benefit overall.

IRS Tax Benefits for Education: Information Center

IRS Tax Tip 2016-36, March 9, 2016
Tax Savings from Higher Education Costs