Education Tax Benefits
The following information is not provided as legal or tax advice. Individuals should refer to the most recent IRS Publication 970, Tax Benefits for Higher Education [PDF] [HTML], consult with a qualified tax professional, and/or contact the IRS Taxpayer Assistance line at 1-800-829-1040 with regards to any credit or deduction claimed on a personal tax return.
You may be able to take a credit of up to $2,500 for qualified education expenses paid for each student who qualifies for the American Opportunity Credit. This credit equals 100% of the first $2,000, and 25% of the next $2,000 of qualified expenses paid for each eligible student. The full amount of the credit is subject to certain income limitations.
The Lifetime Learning Credit may be available to taxpayers who pay higher education costs but are not eligible to claim the American Opportunity Credit. The credit is equal to 20% of the first $10,000 of tuition and required fees paid each year (for all students in the family) with a maximum credit of $2,000.
This deduction is available to individuals paying interest on student loans used for higher education and it can reduce the amount of your income subject to tax by up to $2,500.
In order to help you determine your eligibility for an education credit or tuition deduction, Baylor provides a Form 1098-T for each calendar year. In years prior to 2018, your 1098-T included a figure in Box 2 that represented the qualified expenses that were billed to your student account during the calendar year. Due to a change in reporting requirements under federal law, beginning with tax year 2018, Baylor reports in Box 1 payments received during the year for qualified expenses.