Thanks to the Taxpayer Relief Act of 1997, families who are paying for higher education or repaying educational loans are eligible for tax benefits that make higher education more accessible and affordable.
Details about these programs are available in IRS publication 970. For more information, contact the Office of Financial Aid at 800-427-5029 or
finaid@udayton.edu, your tax adviser or the IRS Help Line at 800-829-1040.
Hope Tax Credit
To be eligible for the Hope tax credit, worth up to $1,650 per year, you must be a first- or second-year student and be enrolled at least half time (usually six credit hours per semester). If your family has multiple students who meet these requirements, multiple tax credits may be claimed.
Lifetime Learning Tax Credit
The Lifetime Learning tax credit, worth up to $2,000 per year, is available for all years of post-secondary education and for courses to acquire or improve job skills. You are not required to be enrolled in a certain number of credit hours to receive this tax credit; however, a family may only claim one Lifetime Learning tax credit per year.
Tuition and Fees Deduction
If you do not qualify for the Hope or Lifetime Learning tax credits because of income limitations, you may be eligible for the tuition and fees deduction. This deduction allows you to reduce the amount of your income subject to tax by $4,000, and it can be claimed even if you do not itemize deductions on your taxes.
Student Loan Interest Deductions
If you — or your parents — have taken out an educational loan to pay for your education and you are enrolled at least half time each semester, you may be able to deduct the interest paid on the loan. To be eligible for a deduction, which has a maximum of $2,500 per year, your adjusted gross income must be less than $70,000, or $140,000 for those who are married and file a joint return.
529 College Savings Plan
The 529 College Savings Plan allows families to save for college tax-free and tends to have a low impact on need-based financial aid eligibility.
Prepaid Tuition Plans
Prepaid tuition plans are college savings plans guaranteed to increase in value at the same rate as college tuition. They are exempt from federal taxes and, in some cases, exempt from state and local income taxes.
