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Federal Tax Credits & Deductions

Federal Tax Credits

A tax credit is an incentive that allows taxpayers to subtract an amount from their local, state, or federal tax liability. Governments offer tax credits to incentivize certain behaviors or to support public goods. The federal tax programs are:

  • American Opportunity Credit—allows you to claim up to $2,500 per student per year for the first four years of school as the student works toward a degree or similar credential.
  • Lifetime Learning Credit—allows you to claim up to $2,000 per student per year for any college or career school tuition and fees, as well as for books, supplies, and equipment that were required for the course and had to be purchased from the school.

For more information, contact the IRS or your accountant, or visit: studentaid.gov/resources/tax-benefits.

Federal Tax Deduction

A federal tax deduction is a reduction in your income prior to determining the amount of tax you owe. If you are eligible, you will be able to deduct a portion of the interest expense you paid on your federal student loans in the prior calendar year. The maximum deduction is $2,500 a year.

For more information, contact the IRS or your accountant, or visit irs.gov's Publication 970 page.

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