Taxes for Individuals

Alternatives to the college tuition deduction

Now that the calendar has turned to August, college students are starting to look towards the beginning of the fall semester.  Whether that be in-person, online, or a hybrid of both, it’s important for parents and students to recall that the $4,000 tuition and fees deduction they may have relied on in past years is no longer available. The good news is that there are alternatives. Here are two of the more popular education credits:

Alternative No. 1: The AOTC

The American Opportunity Tax Credit (AOTC) is a credit of up to $2,500 per student per year for qualified undergraduate tuition, fees and course materials. The deduction phases out at higher income levels, and is eliminated altogether for married couples with a modified adjusted gross income of $180,000 ($90,000 for singles).

Alternative No. 2: The Lifetime Learning Credit

The Lifetime Learning Credit provides an annual credit of 20 percent on the first $10,000 of qualified tuition and fees ($2,000 credit), for either undergraduate or graduate level classes. There is no lifetime limit on the credit, but in 2019 only couples making less than $116,000 per year (or singles making $58,000) qualify for the full credit. Unlike the AOTC, this deduction is per tax return, not per student.

Credits usually beat deductions

Both the AOTC and the Lifetime Learning Credit are generally more valuable than the expired tuition and fees deduction, because as credits they reduce your income tax directly, while the deduction merely reduced how much of your income is taxed.

In addition to the two alternative education credits, there are many other tax benefits that reduce the cost of education. This includes breaks for employer-provided tuition assistance, deductions for student loan interest, tax-beneficial college savings options, and many other tax-planning alternatives.

Please contact a Dugan & Lopatka professional at or (630) 665-4440 if you’d like an overview of the alternatives available to you.

related articles