Not only can you earn college credit from an online college, but you can also earn tax credit. Online colleges, as long as they are accredited, generally qualify for federal student aid programs and education tax credits in the same manner brick-and-mortar campuses do. This means you can keep your job and earn a degree from anywhere, without giving up the educational tax perks.
While it doesn't matter that the college is online, it does matter that it's accredited. You can verify accreditation by searching for the college's name at the U.S. Department of Education's database. Your state may also require that the college be accredited if you want to receive any tax breaks from it. You can also verify that expenses are eligible by asking the online college's financial aid office.
You have several options for writing online college off on your taxes, as long as you are otherwise eligible. There are two possible tax credits: the American Opportunity Credit (for up to $2,500 and available to undergraduate students for up to four years) and the Lifetime Learning Credit (up to $2,000 for any college student with no restriction on maximum number of years). You could also write the expense off by taking a the tuition-and-fees deduction, reducing taxable income up to $4,000; or by taking a student loan interest deduction and reducing taxable income up to $2,500. If you enroll in an online college for work-related education, you may be eligible for a business deduction.
Those expenses you incur from your online education, that can be written off, depend on the type of tax credit or deduction you take. Generally, tuition and required fees and materials for your courses are eligible expenses. Generally you can also write off the costs for your equipment, such as a computer for online classes. The online college should send you a Form 1098-T that can be used for figuring out eligible expenses when filing your taxes. Ask your financial aid office about this form if you do not receive one. You may need to complete a W-9S with their office to get the 1098-T form.
You can only write off your expenses from the online college that you incurred out-of-pocket. If you received a tax-free scholarship or grant, or your employer paid your costs, you cannot receive a double benefit. The amount you can write off on your taxes or claim a credit for is reduced by the amounts you receive from these other sources. Student loans, however, don't count, and you can still receive the tax credits and deductions for the eligible expenses.
- U.S. Department of Education - Federal Student Aid: Accreditation
- Internal Revenue Service: American Opportunity Credit
- Internal Revenue Service: Lifetime Learning Credit
- Internal Revenue Service: Student Loan Interest Deduction
- Internal Revenue Service: Tuition and Fees Deduction
- Internal Revenue Service: Business Deduction for Work-Related Expenses
Sara Mahuron specializes in adult/higher education, parenting, budget travel and personal finance. She earned an M.S. in adult/organizational learning and leadership, as well as an Ed.S. in educational leadership, both from the University of Idaho. Mahuron also holds a B.S. in psychology and a B.A. in international studies-business and economics.