FAQ - Frequently Asked Questions

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Tax Credits

General Questions

Please refer to https://www.irs.gov/individuals/qualified-ed-expenses. Penn State cannot provide individual tax advice, you should consult your tax advisor with any tax questions.

Not in all situations. The amount of the tax credit that you may claim will depend on your individual situation. The IRS is providing instructions on the application of the 1098-T information and eligibility requirements for the new tax credits.

Please consult your tax preparer/consultant to determine how the American Opportunity and Lifetime Learning tax credits and the Deduction for Educational Expenses affect you.

You may have received nontaxable grants or scholarships, tax-free distributions from an Education IRA, or tax-free employer provided educational assistance that may need to be deducted from qualified expenses to calculate the credit amount.

Generally, the credit/deduction is available only for payments of qualified tuition and related expenses that cover an academic period beginning in the same calendar year in which the payment was made. An exception, however, allows the taxpayer to claim a tax credit/deduction for payment of qualified tuition and related expenses made during the tax year for the academic period January, February, and March of the following year. Consult your tax preparer/consultant for tax return preparation advice.

Penn State's federal tax ID number is 24-6000376.

Qualified payments for calculating tax credits/deductions include the following:

  • Personal earnings
  • Personal savings
  • Loans
  • Gifts
  • Inheritance

Ineligible payments for calculating tax credits/deductions:

  • Grants
  • Scholarships
  • Tax-free distributions from an Education IRA
  • Tax-free employer provided educational assistance
  • Other forms of financial aid (which you are not required to repay)

The amount a taxpayer may claim, for both the American Opportunity and Lifetime Learning tax credits is gradually reduced where the modified adjusted gross income (MAGI) is higher than $80,000 for single taxpayers and $160,000 for joint filers. A taxpayer whose MAGI is greater than $90,000 ($180,000 for joint filers) cannot benefit from this credit.

If you are married filing a separate tax return, you cannot claim the credit.

For the Deduction for Higher Education Expenses, the income limitation is MAGI of not more than $80,000 ($160,000 on a joint return).

An eligible dependent is a person for whom you can claim a dependency exemption.

This generally includes your unmarried child who is under the age of 19 or who is a full-time student under the age of 24, if you supply more than half the child's support for the year.

The American Opportunity and Lifetime Learning tax credits result in a reduction of the annual federal income tax owed by the taxpayer(s) who claim the student as their dependent.

This tax credit may lead to a refund of previously paid federal income tax.