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IRS; Tax Benefits for Higher Education

posted Mar 17, 2017, 10:11 PM by Zaher Fallahi

Higher education costs paid in 2016 can mean tax savings when taxpayers file their tax returns. If taxpayers, their spouses and dependents took post-high school coursework in 2016, they may be qualify for a tax credit or deduction.


The following are some facts from the IRS about tax benefits for higher education.


For 2016, there are two tax credits available to help taxpayers offset the costs of higher education. The American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC) that may reduce the income tax owed. Use  Form 8863 to claim the related education credits.



I- The American Opportunity Credit (AOC) is:


1- Worth a maximum benefit up to $2,500 per eligible student.


2- Only for the first 4 years at an eligible college/vocational school.


3- For students pursuing a degree or other recognized higher education credential.


4- For students enrolled at least ½ time for at least one academic period during 2016. Taxpayers can claim the AOC for a student enrolled in the first 3 months of 2017 as long as they paid qualified expenses in 2016.



II- The Lifetime Learning Credit (LLC) is:


1-Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.


2-Available for years of postsecondary education and for courses to acquire/ improve job skills.


3-Available for an unlimited tax years


The tuition and fees deduction can reduce the amount of income subject to tax. This deduction may benefit taxpayers who do not qualify for the AOC or the LLC. Use Form 8917 to claim the deduction.



III-The Tuition and Fees Deduction is:


1-Worth a maximum benefit up to $4,000,


2-Claimed as an adjustment to income,

3-Available even if a taxpayer doesn’t itemize deductions on Schedule A,


4-Limited to tuition and certain related expenses required for enrollment or attendance at eligible postsecondary educational institutions.



IV- Additionally:


1-Beginning in 2016, to be eligible for an education benefit, a student is required to have Form 1098-T, Tuition Statement. They receive this form from the school they attended. There are exceptions. See Publication 970 for more details.


2-They may only claim qualifying expenses paid in 2016.


3-They can’t claim either credit if someone else claims them as a dependent.


4-They can’t claim either AOTC or LLC and the Tuition and Fees Deduction for the same student or for the same expense in the same year.


5-Income limits could reduce the amount of credits or deductions they can claim.


6-The Interactive Tax Assistant tool on can help check eligibility.


IRS Free File

Taxpayers can use IRS Free File to prepare and e-file their federal tax returns for free. File Form 8863, Education Credits, with your Form 1040. Free File is only available at


The IRS reminds students using the Free Application for Federal Student Aid (FAFSA) that the IRS Data Retrieval Tool currently is unavailable.  This does not limit an individual’s ability to apply for aid. Applicants can manually provide their tax return information. The IRS offers alternatives for the retrieval of the income information needed.



Zaher Fallahi, CPA, Tax attorney, advises taxpayers including Americans-living abroad, with their taxes, IRS representation, foreign accounts (FBAR, FATCA, OVDP, foreign trusts). Telephones (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), or e-mail to: