, Answering FAQ'sTurboTax Employee
You can deduct tuition paid with student loans as education credits or deductions. Depending on the guidelines you fall under, you can claim either the American Opportunity Credit, the Lifetime Learning Credit, or the Tuition and Fees Deduction. The credits or deductions offered under each program are:
- American Opportunity Credit, you will receive a maximum credit of up to $2,500 per eligible student,
- Lifetime Learning Credit, you will receive up to a $2,000 credit per return, and
- Tuition and Fees deduction, your maximum deduction can be up to $4,000.
Do you subtract loan money from tuition billed?
A loan is not tax-free educational assistance so you do not reduce your qualified education expenses, such as tuition, by the proceeds from your student loan.
You paid $3,000 for tuition (a qualified expense). To help pay this cost, you obtained a $2,000 student loan. Since the student loan is not tax-free educational assistance, you do not need to reduce the tuition by the amount paid with the student loan.
You are eligible to take the education credit or deduction for the entire $2,000 paid from proceeds of your loan as long as you meet the other requirements of either the American Opportunity Credit, the Lifetime Learning Credit, or the Tuition and Fees Deduction.
All of my tuition is paid through student loan. Can I still take an education credit?
You can claim the American Opportunity Credit or the Lifetime Learning Credit for qualified educational expenses paid with proceeds of a loan whether or not all of your tuition is paid with the proceeds of the loan.
You may also be able to claim the Tuition and Fees Deduction even if all of your tuition is paid through the student loan. Your credit or deduction is figured based on the year the expenses are paid and not when the loan is repaid.
Don't worry, let TurboTax calculate which educational expenses qualify, and which benefit will maximize your return.
Check out these resources for more information:
- Education Credits
- Tuition and Fees Deduction
- Can I claim the student loan interest deduction?
- Who claims the education credit, Parent/Dependent/or Relative?
- What are qualified education expenses?