Tax Deductions for Parents of College Students
No one likes paying for college and no one likes doing their taxes. Fortunately there are a few ways to make the process more pleasant during tax time with tax deductions for parents of college students. These college student tax credits can give you a few of your tuition dollars back from the government when you file your taxes each year.
**This post may contain affiliate links, which means if you click on a link and make a purchase, we may receive a small commission. As Amazon Associates we earn from qualifying purchases. For more information, see our full disclosure.
Tax Deductions for Parents of College Students
There are 2 tax credits and one tax deduction available to parents of college students. They are the American Opportunity Credit, the Lifetime Learning Credit, and the Student Loan Interest Deduction.
Tax Deductions for Parents of College Students: The American Opportunity Credit
Who can claim the American Opportunity Credit?
The American Opportunity Credit is one of the tax deductions for parents of college students The parent must claim their student as a dependent on their tax return. College students who are not dependents on anyone else’s return may also claim the credit.
What are the eligibility requirements for the American Opportunity Credit?
- The student must be enrolled at an eligible educational institution. (If you received a 1098-T, they most likely are an eligible institution.)
- The student must be enrolled at least half time.
- The student must be pursuing a degree or other recognized education creditial.
- The filer must have paid the expenses.
- This credit is available only for the first 4 years of postsecondary education.
Income Limits for the American Opportunity Credit:
If your adjusted gross income is below $90,000 for single filers and $180,000 for joint filers, you can take up to a $2500 credit per eligible student on your return. The cool thing about credits (as opposed to deductions) is that they come straight off your tax bill and you can receive a refund meaning you could potentially receive CASH BACK. 40% of the credit is refundable for most taxpayers.
Tax Deductions for Parents of College Students: Lifetime Learning Credit
Who can claim the Lifetime Learning Credit?
The Lifetime Learning Credit is another tax credit available to parents of students if the student is your dependent. Students may also claim this credit is they are not a dependent on another tax return.
Can I take both the American Opportunity Credit and the Lifetime Learning Credit on the same return?
No. You can only take one of the credits.
What type of education qualifies for the Lifetime Learning Credit?
Any course taken to acquire or improve job skills is eligible. It does not have to lead to a degree or credential. The student does not have to be half time. One course qualifies.
Which credit should I take if I am eligible for both?
Usually the AOC is better, but you can only take the AOC for 4 years per eligible student. You can switch to the Lifetime Learning Credit after you have exhausted the 4 years of eligibility for the AOC.
What are the differences in the American Opportunity Credit and the Lifetime Learning Credit?
- The AOC gives you CASH BACK. You can have an income of zero and still receive the AOC.
- The LLC will NOT result in cash back. You cannot receive a refund through the LLC.
- You must have an income to receive the LLC.
- The LLC is available for an unlimited number of tax years.
Income Limits for the Lifetime Learning Credit:
The Lifetime Learning Credit income threshold is the same as for the AOC ($90,000 for single filers and $180,000 for joint filers).
A note about the LLC: Our daughter is a medical student with zero income. She is ineligible for either credit. Even if you never claimed the AOC, you are not eligible for the AOC if you have completed 4 years of post high school education. And, if you have no income, you are ineligible for the LLC. (I need to call my congressman about this!)
Tax Deductions for Parents of College Students: Student Loan Interest Deduction
The student loan interest deduction is not a credit. It is one of the tax deductions for parents of college students, meaning it reduces your income, not your tax liability. The maximum deduction is $2,500.
Who is eligible for the student loan interest deduction?
This deduction can be taken by the person who is claiming the student as a dependent AND is legally obligated to pay the student loan interest. The person who is legally obligated on the loan will receive a 1098-E from each institution to whom $600 or more in interest was paid during the tax year.
What qualifies as a student loan?
The loan must have been taken out solely for educational purposes.
What is the income limit for a student loan interest deduction?
The income threshold for this deduction is $100,000 for single taxpayers and $200,000 for joint taxpayers.
College student tax credits and student loan interest deduction are complicated in their eligibility, so I encourage you to consult a tax professional. I have done my best to report accurate information, which I obtained from IRS Publication 970.
Related posts for Tax Deductions for Parents of College Students:
How to Fill Out the FAFSA: 5 Tips to Know
How Will We Pay for College Next Fall?
How to Win Scholarships: Tips and Tricks
Does My College Child Need Legal Forms?
We would love to stay in touch!
Be sure to see all of the Next Phase Parenting Resources on our Resources Page and subscribe to our Next Phase Parenting newsletter below for a weekly dose of love from us about surviving and thriving in your almost or already empty nest. Visit our Facebook page, and follow us on Pinterest and Instagram where we share lots of helpful info for parents with teens, young adults, our aging parents, and other issues that we experience in the sandwich generation ! Thank you so much!❤️
