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Business Officer Magazine
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Federal File

Coverage of legislation and regulatory activity that affects higher education

By Mary Bachinger and Liz Clark

2013 Higher Education Tax Credits and Benefits

The Internal Revenue Service (IRS) is promoting new tools to draw students' and families' attention to higher education tax breaks, as well as resources to help them understand the federal tax credits and deductions they may be eligible to claim on their 2012 tax returns. NACUBO encourages institutions to use the following tools and other resources to promote student and parent awareness of federal higher education tax credits and benefits:

Publication 4772. This one-page flyer briefly describes the American Opportunity Tax Credit (AOTC), with a link to additional information. It is intended to be handed out or mailed to students or posted around campus. Download the flyer from this Web site: www.irs.gov/pub/irs-pdf/p4772.pdf.

The Interactive Tax Assistant. The IRS has developed an online progression of questions to help taxpayers determine their eligibility for the AOTC, the Lifetime Learning Credit, or the above-the-line deduction for tuition and fees. Find the Tax Assistant at www.irs.gov/uac/Am-I-Eligible-to-Claim-an-Education-Credit%3F.

Education-related tax benefits of special interest. While there are numerous benefits in the tax code, in 2013, as students and parents are preparing their 2012 filings, they may particularly want to determine their eligibility for the following three benefits:

  • The American Opportunity Tax Credit. The AOTC provides a 100 percent tax credit for the first $2,000 of certain higher education expenses and a 25 percent tax credit for the next $2,000 of such expenses. The AOTC is partially refundable and is available for up to four years of college. It is phased out beginning at $80,000 adjusted gross income for single filers, and $160,000 for joint filers.
  • The Lifetime Learning Credit. This is a nonrefundable tax credit of up to $2,000 per family. A taxpayer can claim the Lifetime Learning Credit for up to 20 percent of the taxpayer's first $10,000 of out-of-pocket qualified tuition and related expenses. The credit is capped at $2,000 per taxpayer (even for joint filers with multiple students in a household). This limit is different from the American Opportunity Tax Credit, which is based on the number of dependents in a family. The credit is available for all years of postsecondary education, with no limit on the number of years the Lifetime Learning  Credit can be claimed for each student in a family. Taxpayers cannot claim both the AOTC and the Lifetime Learning Credit for the same student in the same filing year. The latter is phased out beginning at $60,000 adjusted gross income for single filers, and $120,000 for joint filers.
  • The above-the-line tuition deduction for qualified tuition and related expenses. This deduction enables taxpayers with a modified adjusted gross income of $65,000 or less a year ($130,000 for married couples filing jointly) to deduct up to $4,000 annually in tuition and related expenses. Individuals with a modified adjusted gross income of more than $65,000 but not more than $80,000 (or more than $130,000 but not more than $160,000 for married couples filing jointly) are eligible for an annual deduction of up to $2,000.   

NACUBO CONTACTS Mary Bachinger, director, tax policy, 202.861.2581, and Liz Clark, director, congressional relations, 202.861.2553. 

Tools to Use

NACUBO encourages institutions to use the following resources to promote student and parent awareness of federal higher education tax credits and benefits:

  • IRS Publication 4772.
  • The IRS Interactive Tax Assistant.
  • Education-related tax benefits of special interest, such as the American Opportunity Tax Credit, the Lifetime Learning Credit, and the above-the-line tuition deduction for qualified tuition and related expenses.