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Tax Benefits for Higher Education

Government tax credit programs are designed to make college education more feasible and affordable for students. The Financial Aid Office has highlighted just a few of the various tax programs that support educational costs. Keep in mind that tax laws can often change, so it is a good idea to speak with an experienced tax professional before you claim your tax deduction and/or credit.

Education Loan Interest Deduction

Taxpayers may deduct the interest paid on “qualified” Federal educational loans. Phillips Graduate Institute Federal Stafford Loan or Graduate PLUS Loan are considered a qualified educational loan.

  • Qualifying loans must have been used to pay for education expenses such as tuition, fees, books, room, and board.

  • To claim the interest deduction, the taxpayer must be the individual responsible for repaying the loan

  • The maximum interest deduction is $2,500

  • The maximum deduction is available to taxpayers whose adjusted gross income is under $55,000 if filing a single return, or $110,000 if filing a joint return. The amount of the deduction is gradually phased out for those with an Adjusted Gross Income of between $110,000 and $140,000 (if filing a joint return or between $55,000 and $70,000 (if filing a single return or head of household)

  • Married taxpayers must file a joint return in order to claim the deduction

  • The student must attend, or have attended, school at least half-time

  • Interest is deductible for all years during the loan repayment period


Tuition and Fees Deduction

The tuition and fees deduction allows qualified higher education expenses to be deductible as an income adjustment. You do not need to itemize deductions to claim this deduction.

  • The deduction can only be claimed for tuition and fees. Books, room, and board are not eligible expenses.

  • Prior to calculating the deduction, the taxpayer must subtract any scholarships or other tax-free financial assistance, such as grants, from their total tuition and fees.

  • The maximum amount a taxpayer may deduct is $4,000.

  • The maximum deduction is available to taxpayers whose adjusted gross income is under $65,000 if filing a single return, or $130,000 if filing a joint return.

  • A reduced deduction of $2,000 is allowed to taxpayers whose adjusted gross income is between $65,000 and $80,000 if filing a single return, or $130,000 and $160,000 if filing a joint return.

Lifetime Learning Education Tax Credit

The Lifetime Learning Credit authorizes a tax credit for expenses incurred for any postsecondary (undergraduate, graduate, and vocational) education.

  • An individual may claim an income tax credit for 20% of qualified tuition and fees for themselves, a spouse, and/or dependents.

  • Books, room, and board are not eligible expenses for the credit.

  • Prior to calculating the credit, the taxpayer must deduct any scholarships or other tax-free financial assistance, such as grants, from their total tuition and fees.

  • The maximum yearly credit is $2,000.

  • The credit should be taken in the year that the educational expenses are incurred. Educational expenses that were paid by means of loan funds are eligible, even if the loan is still outstanding. The credit is phased out for taxpayers whose income is between $94,000 and $114,000 if filing a joint return, or between $47,000 and $57,000 for all others.

  • This credit covers a broad range of education including: full-time, half-time, or below half-time studyundergraduate or graduate courses.

  • Training programs to acquire or improve career skills.


For additional information, you may access the IRS website at www.irs.gov or check your phone book for the toll-free IRS number in your area. The IRS publishes several free guides for students, including Tax Benefits for Higher Education (Publication 970). These guides are available on the website. The IRS also publishes several free student guides that provide details on scholarships, fellowships, and other tax benefits.

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