5 Education Tax Credits and Deductions You Don’t Want To Miss in 2010

Education is very important for families because it provides unlimited opportunities for individuals who have one. The government knows this so as much as possible they would like to help by providing numerous education tax credits and deductions to both the people who are pursuing it and for the people that are teaching or providing the education.

There are 5 most commonly used education tax credits and deductions that you can claim for tax year 2010. One of the deduction pertains to the expenses incurred by a person who is teaching in the kindergarten to 12th grade while the other 4 tax breaks pertain to the cost of going to college. For teachers and professors of post-secondary schools (college, vocational school, trade school), you may be able to deduct your school-related expenses as well but only if you are itemizing your return.

The American Opportunity Credit , Lifetime Learning Credit and the Tuition and fees deduction pertain to qualifying expenses paid for any post-secondary education for a student. These means that expenses paid for kindergarten through 12th grade do not qualify. Qualifying expenses may include tuition fees, registration fees, activity fees, course related textbooks and equipment (subject to conditions for certain credit) that are incurred at a qualifying institution. These tax credits cannot be used at the same time for the same student. In other words, there can’t be a double benefit!

  • Example: You (taking courses towards a master degree) and your dependent son (a freshman in college) are both going to school. You can use the American Opportunity Credit for your son who is a freshman in college and Lifetime Learning credit for yourself but you cannot take both the American Opportunity credit AND the Lifetime Learning credit for your son. In addition, you cannot claim both the Lifetime Learning credit and the tuition and fees deduction for yourself!

The rule of thumb is you should claim the education tax credits or deductions that will yield the greatest tax benefit!

Below are the 5 Education Related Tax Credits and Deductions.

American Opportunity Credit

This educational tax credit is also called the expanded Hope Credit. This credit is available for students who are  attending the first four years of post-secondary institution. The amount of the  credit is up to $2,500 for qualified expenses paid at a qualified institution. The student must be enrolled at least half-time of a normal academic load for at least one academic period in a program leading to a degree, certificate or other recognized educational credential.  For most taxpayers, this is the credit that provides the most tax benefit. However, this credit is only available through tax year 2012, unless the Congress extends the benefit again, and will revert back to the old Hope Credit.

Lifetime Learning Credit

You can received up to $2,000 of credit per tax return (not per student) for qualifying expenses used for post-secondary education by you, your spouse and your dependents. With the Lifetime learning credit, there is no limit on the number of years that you can claim this. So potentially, you can claim this if the student is in a master’s degree, doctorate, or just taking college courses in order to improve skills.  Typically, you would only claim this if you are no longer eligible for the American Opportunity credit (or the Hope Credit), or if the tuition and fees deduction provides less tax benefit to you.

Tuition and Fees Deduction

You can claim as much as $4,000 of deduction for qualifying expenses for a student who is in college or any post-secondary institution. You do not have to itemize your deduction for you to claim this as this is one of the adjustments to your gross income. You normally cannot take this college tax deduction if you are already claiming the American Opportunity Credit or the Lifetime Learning Credit for the same student. In addition, this credit is usually taken if you do not qualify on the other two education credit because your AGI is more than the income threshold.

Student Loan Interest Deduction

You can deduct up to $2,500 of interest that you paid for your student loans used for higher education if your modified adjusted gross income (MAGI) is less than $75,000 ($150,000 if filing a joint return). You do not have to itemize your deduction to claim this since.

Educator’s Expenses

If you are a teacher, instructor, counselor, principal, or aide who worked in a primary and secondary schools (kindergarten through grade 12) for at least 900 hours during a school year, then you can deduct up to $250 of qualified expenses such as books, school supplies, equipment (computer, software, printers, etc), and other materials used in the classroom. Expenses used for home schooling or non-athletic supplies for courses in health or physical education do not qualify. For 2010, you do not have to itemize your deduction for you to claim this. However, if your qualified expenses exceed the $250 limit, you can claim the $250 as adjustments to income and any excess can be included in the miscellaneous expenses section  of your Schedule A  – itemized deduction.

For teachers and professors of post-secondary schools (college, vocational school, trade school), you may be able to deduct your qualifying school-related expenses that were not reimbursed by your employer but only if you are itemizing your return. You can claim your deduction by reporting it in the miscellaneous expenses section  of your Schedule A  – itemized deduction.

What about you, have you taken advantage of any of these education tax credits and deductions?


  1. When it comes to education and health, there are so many avenues to offset the expenses – but most don’t since they aren’t aware of the credits and deductions!

    This post will definitely be helpful for those with education related debt.

  2. No education-related tax deduction or credit is allowed for taxpayers who are married but filing separately. Separate filers are not eligible for the American Opportunity credit, Lifetime Learning Credit, the tuition and fees deduction, or the student loan interest deduction.