14 higher education tax benefits will cost the federal government $95.3 billion between 2010 and 2014, according to an estimate by the Joint Committee on Taxation (JCT).
The estimate is included in an analysis of the 14 tax benefits available for college students and their parents by the Congressional Research Service (CRS). The analysis outlines the qualifications and limitations of each benefit.
The report notes that tax benefits are generally available to eligible taxpayers regardless of need, unlike financial aid, which is often directed toward students with financial need. However, the report states that some benefits are limited to those who make less than a certain amount. These income limited tax benefits have an income phase-out range.
"Taxpayers with incomes below the start of the phase-out range are eligible to claim the maximum tax benefit amount," the CRS report states. "The amount of the credit that can be claimed is then reduced for individuals with incomes within the phase-out range, and is zero for those with incomes above the phase-out range."
The Congressional Research Service notes the 14 tax benefits fit into four categories: credits, deductions, exemptions and exclusions. Some of these tax benefits, or "incentives," apply to current-year education-related expenses, like books and tuition; while others apply to student loans or education savings plans. Each covers a variety of qualifying education expenses, with some limiting eligibility by income, education level and, in the case of an exemption for parents of dependent students, age.
"Some benefits are subject to an annual limit, or cap," the reports states. "For example, the maximum annual American Opportunity Tax Credit that may be claimed is $2,500. A number of the tax benefits may be limited by the type of 'qualifying' expenses they are used to offset. For some tax benefits, only tuition and related fees qualify. Generally fees that must be paid to the educational institution as a condition of enrollment or attendance are considered 'required fees.' Other tax benefits can be used to offset course-related books, supplies, and materials. And still other benefits may be used to cover travel and other expenses."
Download the report "Higher Education Tax Benefits: Brief Overview and Budgetary Effects."