The Internal Revenue Service offers several types of deductions or credits for education expenses you pay. These benefits can add up to big savings on your tax return, and with several options available, it's worth it to take a few moments to calculate your school expenses. As of 2012, the Lifetime Learning credit can save you up to $2,000, the Tuition and Fees deduction can save you up to $4,000 and the American Opportunity tax credit can save you up to $2,500, plus boost your tax refund by up to $1,000. Each deduction has different qualifying criteria, so check the IRS website to see which benefit you can claim.
Calculate the cost of your tuition. Your tuition expense is shown on the financial aid statements you receive from your school or on IRS Form 1098-T. Your school sends you this form at the end of each year it receives tuition payments from you. You'll notice and amount in either Box 1 or 2 of the form that indicates the amount you paid or were billed for tuition.
Calculate the cost of required fees. Your school charges administrative and other fees that are required for your attendance. These fees are shown on your financial aid statements and may be included with your tuition expenses on Form 1098-T. However, if you paid more in tuition and required fees than is shown on the 1098-T form, you'll want to add your extra costs to the total.
Subtract the value of scholarships or grants you receive during the year. You can't report education expenses paid with these funds on your tax return. If you receive Form 1098-T, the amount of scholarships or grants you receive appears in Box 5. If the amount in Box 5 is larger than the amount in Box 1 or 2 on your 1098-T, you do not report the difference on your tax return. In most cases, scholarship or grant money you receive is not taxable and will not be included on your return. The result from your calculation can be used to claim the Tuition and Fees deduction, the Lifetime Learning credit or the American Opportunity tax credit.
Calculate the cost of books and required course materials. Use receipts you saved for these purchases, or review your bank and credit card statements. You can include the cost of books and supplies, along with your tuition and fees expense, when you claim the American Opportunity tax credit.
- If you're no longer a student and are repaying student loans, you may qualify for the student loan interest deduction of up to $2,500, as of 2012. Check the IRS website for details.