Borrower Counseling Group
617.728.4200, ext. 5009
Mon - Thu: 8:00 a.m. - 10:00 p.m.
Fri: 8:00 a.m. - 5:00 p.m.
Sun: 11:00 a.m. - 10:00 p.m.
Please note: All times Eastern.
Borrower Tax Incentives
Borrowing federal student loans gives you certain tax advantages. Whether you are in repayment, taking classes, or working, you may be eligible for these incentives.
All of these deductions and credits have distinct eligibility requirements. Before claiming any incentives, consult a tax professional. For more information, consult IRS Publication 970.
Student Loan Interest Deduction
You may qualify for a tax deduction just by paying your student loans.
- If you are not a dependent listed on someone else’s tax return, it is possible for you to deduct up to $2,500 of student loan interest paid a year.
- Eligible taxpayers need to have a modified adjusted gross income (MAGI, see below for more information) less than $60,000 ($120,000 if filing jointly).
- If your MAGI is more than $60,000 but less than $75,000 ($120,000 and $150,000 if filing jointly), you may be eligible for a smaller deduction.
- If you make more than $75,000 ($150,000 if filing jointly), you are not eligible to deduct student loan interest.
Tuition and Fees Deduction
You may be able to deduct qualified education expenses—including tuition and fees—paid for you, your spouse, or a dependent.
- If your MAGI is less than $65,000 ($130,000 if filing jointly), you may be able to deduct $4,000 in qualified expenses.
- If your MAGI is more than $65,000 but less than $80,000 ($160,000 if filing jointly), you may be eligible for a $2,000 deduction.
- If you make more than $80,000 ($160,000 if filing jointly), you are not eligible for the tuition and fees deduction.
Employer Education Assistance
Your employer may provide you with education assistance benefits for undergraduate or graduate courses tax-free each year.
- Benefits can be up to $5,250.
- Payments above $5,250 may also be tax-free if they represent a working condition fringe benefit.
- Benefits must be paid toward tuition, fees, books, supplies, or equipment.
- If you paid for the expenses, you may be able to deduct them as an employee business expense.
You may be eligible for the Lifetime Learning Tax Credit and the American Opportunity Tax Credit, but some restrictions apply.
- You’re ineligible for these credits if you’re married and file a separate return from your spouse or if you’re listed as a dependent on another person’s tax return.
- You cannot claim multiple credits for the same student in the same year.
- You cannot take both an education credit and the tuition and fees deduction for the same student in the same year.
Lifetime Learning Tax Credit
You may claim a Lifetime Learning Credit for qualified education expenses each year you are in school.
- Your credit can be up to $2,000 if your MAGI is less than $50,000 ($100,000 if filing jointly).
- If your MAGI is between $50,000 and $60,000 ($100,000 to $120,000 if filing jointly), you may be eligible for a partial credit.
- Qualified expenses include money you’ve paid directly for education or from borrowed funds.
- This tax credit reduces the amount of income tax you may have to pay, and there’s no limit on the number of years you can claim it.
American Opportunity Credit
The American Opportunity Credit benefits students who are enrolled at least half time for at least 1 academic period during the tax year.
Students must be pursuing an undergraduate degree or other recognized education credential.
- This credit is available for the first 4 years of postsecondary education.
- You can claim up to $2,500 if your MAGI is less than $80,000 ($160,000 if filing jointly).
- If your income is between $80,000 and $90,000 ($160,000 and $180,000 if filing jointly), you may qualify for a credit of a lower amount.
- If the calculated credit exceeds your tax obligation, you may receive up to 40% of the tax credit amount as a refund.
Required Forms for Tax Benefits
You may be able to increase your income tax refund with the credits or deductions outlined above—but which forms do you need to claim your benefits?
In Publication 970 , the Internal Revenue Service (IRS) outlines the details and instructions for claiming your education-related tax benefits. It also explains which forms to use when you file your return.
You’ll want to review the publication to see detailed tax filing information. But, to simplify matters for you, we’ve listed the required forms for some popular credits and deductions found in Publication 970.
If you are a college student, your1098-T will be mailed by January 31st from your school in early February. This form contains the information you need to claim the American Opportunity Tax Credit, the Lifetime Learning Tax Credit, or the Tuition and Fees Deduction. All of these programs have the same eligibility requirements, but you can only use one of them each year. So, be sure to identify the one that provides the greatest benefit for you.
Form 8863 is also required to claim either the American Opportunity Tax Credit or the Lifetime Learning Tax Credit. You can download form 8863 from the IRS website. Use the information on your 1098-T to fill out your 8863. Then, submit the completed 8863 to the IRS along with your return.
To claim the Tuition and Fees Deduction, you’ll use your 1098-T to fill out form 8917. You can download form 8917 from the IRS website. Submit your completed 8917 to the IRS along with your return.
If you are claiming a student loan interest deduction, you will need to use form 1098-E to document the amount of interest you paid last year. If you paid at least $600, your 1098-E form will be mailed from the organization you made your student loan payments to by January 31st. However, you may be able to deduct interest paid on your federal student loans even if you were not sent a 1098-E form. If you paid less than $600 in student loan interest, you can contact your loan holder to find out how much interest you paid in the previous year. You may be able to print your 1098-E from your loan holder’s website or call them to request it if you did not receive it. If you do not know where your student loan are held, you can go to www.NSLDS.ed.gov to find this information.
If you have a loan held with ASA, please call 617-728-4200, ext. 5002.
Enter the information on your 1098-E directly on your return and submit it to the IRS. You are not required to fill out additional forms to claim this deduction.
This document was prepared for informational purposes only and cannot be considered tax advice or otherwise. Please see your tax professional for additional guidance.
What Is Modified Adjusted Gross Income?
Adjusted gross income is calculated by adjusting your full (gross) income—which includes wages, alimony, Social Security, and business, investment, and dividend income—downward based on certain deductions. This amount is then modified by adding back certain items (including student loan deductions) to determine your modified adjusted gross income.