Tax Benefits for Attending an Online College
There are a couple of tax breaks for students attending an eligible educational institution, which the IRS defines as any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Your school should be able to tell you if it qualifies as such.
Hope Credit
The Hope Credit allows you to claim up to $1,650 per tax year for qualified education expenses for each eligible student, which can include tuition and fees, books and supplies, and room and board. This credit may be taken only for the first two years of postsecondary education, and the student must be pursuing an undergraduate degree or other recognized education credential. Additionally, the student must be enrolled at least half time for the academic period.
Lifetime Learning Credit
The Lifetime Learning Credit allows you to claim up to $2,000 per tax year for qualified education expenses for all students enrolled in an eligible education institution. This credit is available throughout the student’s college career and can even be applied for courses taken to improve job skills. With this credit, a student does not have to be pursuing a degree and must be enrolled in at least one course for the academic period.
Student Loan Interest Deduction
If your modified adjusted gross income is less than $70,000 ($140,000 if filing a joint return), there is a deduction for interest on a student loan used for higher education. You can reduce your taxable income by up to $2,500.
Tuition and Fees Deduction
This deduction can reduce your taxable income by up to $4,000; however, if you claim this deduction, you will not be able to take the Hope Credit or the Lifetime Learning Credit.
The key is to research which option will earn you the most money on your taxes. Check out Publication 970 (Tax Benefits for Education) on the IRS website for more details regarding eligibility.
