Horizon Bank


Education Tax Credits and Deductions


ed_tax_creditsTrying to manage college bills and student loan payments? You may be able to find some relief when you file your taxes this year — because there are a variety of deductions that can be taken for education expenses. Here’s an overview:

American Opportunity Credit
Available for each of the first four years of a student’s undergraduate studies, for parents who fall below certain income limits.

How much you can deduct: Up to $2500 in 2016

  • The student must be attending college at least half-time.
  • The student must be in a program leading to a degree or certificate.
  • Parents have to claim their child as a dependent, and they need to take the credit for the tax year in which expenses are paid.
  • Income limitations apply. If you’re a single filer with a modified adjusted gross income (MAGI) below $80,000 or a joint filer with an MAGI below $160,000, talk to your tax preparer to see how much of a deduction you may qualify for.


  • The American Opportunity Credit is calculated for each student, rather than for each tax return — so parents can get credits for multiple qualifying children.
  • It’s easy to claim — your college should send you a Form 1098-T by February 1, and you can then file that form with your federal tax return.

Lifetime Learning Credit

Available for expenses related to college or graduate courses taken throughout your lifetime. The student can be you, your spouse, or your dependent. 

How much you can deduct: Up to $2,000


  • This credit can't be taken in the same year as the American Opportunity credit, on behalf of the same student.
  • It must be taken for the year in which expenses were paid, and you’ll need to file Form 8863 with your federal tax return to claim the credit.
  • Income limitations apply. You may qualify if you’re a single filer with an MAGI below $55,000 or a joint filer with an MAGI below $111,000.
  • The Lifetime Learning credit is limited to $2,000 per tax return, per year — even if more than one person in your household qualifies. If you have more students in your household, talk to your tax professional about which credit or credits will benefit you the most.


  • It has a broader reach than the American Opportunity credit.
  • Even if courses are taken on less than a half-time basis, and don't lead to a formal degree, you or your dependent may qualify.

Student Loan Interest Deduction

Available for most federal student loans, private bank loans, college loans, and state loans.
How much you can deduct: Up to $2,500 worth of interest paid on qualified student loans.


  • The debt must have been incurred while attending on a half-time or more basis.
  • The debt must have been incurred while in a program leading to a degree, certificate, or other recognized educational credential.
  • You cannot be claimed as a dependent on another taxpayer’s return.
  • Certain income qualifications apply. If you’re a single filer with an MAGI of $65,000 or less, or a joint filer with an MAGI of $130,000 or less, you may qualify.


  • If you qualify for each one independently, you can take the student loan interest deduction in the same year as either the American Opportunity credit or the Lifetime Learning credit.

Find out more!

To learn more about the educational tax deductions offered by the federal government, contact Horizon Bank at 888-873-2640 and our financial experts can give you some ideas, so you can talk further with your tax preparer!




© Horizon Bank. All rights reserved.

Horizon Bank