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About 60% of the benefit of the education tax credits accrues to taxpayers with incomes of at least $50,000. About 60% of the benefit of the tuition deduction accrues to taxpayers with incomes of at least $100,000. |
Note: Only tax credits and deductions claimed on taxable income tax returns are included. The value of tax deductions is estimated based on applicable marginal tax rates. Available data do not allow separation of independent students from parents of dependent students claiming tax credits and deductions. Components may not sum to 100 percent due to rounding.
Sources: http://www.irs.gov/pub/irs-soi/09sprintaxreturn.pdf, IRS Individual Income Tax Preliminary Data 2007, calculations by authors.
Download Excel for this figure. Download Excel for all figures and tables. This figure was prepared in October 2009.
- In 2007, the Hope and Lifetime Learning tax credits reduced federal income tax bills by about
$5.2 billion dollars and the tuition and fee deduction reduced tax bills by about $1.5 billion.More
- About 60% of the education tax credits were Hope tax credits, available only to first and second
year undergraduates enrolled at least half time. About 40% of the education tax credits were Lifetime Learning credits, available to individuals enrolled in any undergraduate or graduate courses. (U.S. Budget 2009 Analytical Perspectives)More
- Many taxpayers who claim these credits and deductions do not actually benefit from them because they do not owe taxes.
Beginning in 2009, up to $1,000 of the Hope tax credit is partially refundable to eligible filers without tax liability.More
- Legislation in 2009 also increased the maximum income for Hope eligibility to $90,000 for single filers and $180,000 for joint filers.
The income limits for Lifetime Learning credits are $60,000 and $120,000 respectively. The tuition and fee deduction is available to single filers with incomes up to $80,000 and to joint filers with incomes up to $160,000.More
- As of 2009, the Hope Tax Credit – but not the Lifetime Learning Credit or the tuition and fee deduction –
covers classroom materials in addition to tuition and fees. Most other forms of student aid cover room and board, books, and other education-related expenses.More
- Tax deductions have a bigger impact on people with higher incomes who are subject to higher marginal income tax rates. About a third
of the deductions claimed are on returns that owe no taxes and therefore generate no benefit.More
- Just over half of the tax returns claiming education credits and deductions are from married couples filing jointly. Another 13% are from
heads of household. The tuition payments reported on these returns may be for either the taxpayers or their dependents. Single taxpayers, who are reporting their own tuition payments, account for about a third of the returns filed claiming education credits or deductions. (Statistics of Income, Individual Income Tax returns, Publication 1304.)More
Also Important
- The federal government also allows a tax deduction for interest paid on student loans.
In 2007, 7.5 million taxpayers with taxable returns deducted about $6.3 billion in student loan interest, generating about $440 million in savings. (http://www.irs.gov/pub/irs-soi/09sprintaxreturn.pdf) IRS, Individual Income Tax Preliminary Data 2007; U.S. Budget 2009 Analytical Perspectives.More
- Other significant subsidies to students through the tax code include the personal exemption
allowed for students ages 19 and over, which saved parents about $2.7 billion in 2007. U.S. Budget 2009 Analytical Perspectives.More
