Financial Aid and Tax Issues
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Taxable Financial Aid
Current federal tax laws have made some financial aid taxable income. Financial aid received (excluding loans) in excess of the cost of tuition, fees and books is considered taxable income. You should contact the IRS or a tax preparer for additional information.
Educational Income Tax Credits
There are two educational income tax credits that can reduce your or your family’s federal taxes. They are based on your university tuition and fee charges. The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit provides up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits on the first $10,000 of college tuition expenses. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the American Opportunity Credit, you need not be in the first four years of undergraduate classes. Even if you took only one class, you may take advantage of the Lifetime Learning Credit. For more information about tax credits, you can visit the IRS website