The federal government provides several ways in which your income tax burden can be reduced when you or your parents pay for a college education. Information regarding these benefits can be found in the Federal Tax Benefits section and for additional details, please go to the IRS website or call 800-TAX-1040. You should request publication 970.
There are also New York State benefits where you can take either a tax credit or an itemized tax deduction for allowable college tuition expenses. The expenses must be for undergraduate study, paid by you as a taxpayer, on behalf of yourself, your spouse, or your dependents, to enroll or attend qualifying in- or out-of-state institutions of higher education.
In addition to providing tax breaks some forms of financial aid are considered taxable income. Federal Work-Study earnings are just like income from any job. They are taxable income. Grants and scholarships can also be taxable income. You should save all your receipts for tuition, fees, books and supplies and consult a tax advisor to determine your tax liability.
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Form 1098-T Tuition Statement
You Could Be Eligible for Tax Credits on Your Tuition
The Form 1098-T, Tuition Statement, is issued to help determine if students or their parents are eligible to claim tax credits under the Tax Relief Act of 1997. If you want to know more, check the Frequently Asked Questions About the 1098-T.
Eligible or qualified charges include in-state or out-of-state tuition charges plus other eligible fees including the following:
- Technology fees
- Student activity fees
- Consolidated fees
- Change of program fees
Baruch College
Weifeng Zou
Bursar’s Office
(646) 312-1298
weifeng.zou@baruch.cuny.edu
Borough of Manhattan Community College
Sharlene Gomez
Bursar’s Office
(212) 220-1303
sgomez@bmcc.cuny.edu
Bronx Community College
Douglas Carter
Bursar’s Office
(718) 289-5617
Douglas.carter01@bcc.cuny.edu
Brooklyn College
Blondine Deprinvil
Bursar’s Office
(718) 951-5000 ext. 6838
blondine.deprinvil@brooklyn.cuny.edu
City College
Renee Burgos
Bursar’s Office
(212) 650-8709
rburgos@ccny.cuny.edu
College of Staten Island
Simon Kaplun
Bursar’s Office
(718)-982-2060
Bursar@csi.cuny.edu
CUNY Law School
Irma Chabla
Bursar’s Office
(718) 340-4364
bursaroffice@law.cuny.edu
Graduate Center
Dharven Kanhai
Bursar’s Office
(212) 817-7611
dkanhai@gc.cuny.edu
Graduate School of Journalism
Dharven Kanhai
Bursar’s Office
(212) 817-7611
dkanhai@gc.cuny.edu
Guttman Community College
Jeanne Schlosser
Bursar’s Office
(646) 313-8142
bursar@guttman.cuny.edu
Hostos Community College
Wishart Alleyne
Bursar’s Office
(718) 518-4375
walleyne@hostos.cuny.edu
Hunter College
Irving Rodriguez
Bursar’s Office
(212) 650-3252
irrodrig@hunter.cuny.edu
John Jay College
Ashley Sumasar
Bursar’s Office
(212) 234-8473
asumasar@jjay.cuny.edu
Kingsborough Community College
Marilyn Bellantuono
Bursar’s Office
(718) 368-4598
marilyn.bellantuono@Kbcc.cuny.edu
LaGuardia Community College
Jeanine Wong
Bursar’s Office
(718) 482-5524
jwong@lagcc.cuny.edu
Lehman College
Bursar’s Office
(718) 960-8573
bursar.department@lehman.cuny.edu
Medgar Evers College
Bursar’s Office
(718) 270-6095
bursar@mec.cuny.edu
New York City College of Technology
Wen Yen Chao
Bursar’s Office
(718) 260-5510
wchao@citytech.cuny.edu
Queens College
1098-T Hotline
(718) 997-4534
donna.dalesio@qc.cuny.edu
Queensborough Community College
Lina Krasner
Bursar’s Office
(718) 281-5741
lkrasner@qcc.cuny.edu
School of Labor and Urban Studies
Agustin Gomez Garachana
Bursar’s Office
(646) 313- 8420 ext. 38422
agustin.gomezgarachana@slu.cuny.edu
School of Medicine
Renee Burgos
Bursar’s Office
(212) 650-8709
rburgos@ccny.cuny.edu
School of Professional Studies
Colleen Tam
Bursar’s Office
(646) 664-8640
bursar@sps.cuny.edu
School of Public Health
Esther Cortorreal
Bursar’s Office
(646) 364-9550
esther.cortorreal@sph.cuny.edu
York College
Georgia Hanson
Bursar’s Office
(718) 262-2186
bursar@york.cuny.edu
Learn more about the American Opportunity Credit or Lifetime Learning Credit by accessing IRS Publication 970.
Federal Tax Benefits
Tax credits, deductions and savings plans can help taxpayers with their expenses for higher education.
- A tax credit reduces the amount of income tax you may have to pay.
- A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay.
- Certain savings plans allow the accumulated earnings to grow tax-free until money is taken out (known as a distribution), or allow the distribution to be tax-free, or both.
- An exclusion from income means that you won’t have to pay income tax on the benefit you’re receiving, but you also won’t be able to use that same tax-free benefit for a deduction or credit.
You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for educational credits or deductions, including the American opportunity credit, the lifetime learning credit and the tuition and fees deduction.
An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit.
If you’re eligible to claim the lifetime learning credit and are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both.
Who Can Claim an Education Credit?
There are additional rules for each credit, but you must meet all three of the following for either credit:
- You, your dependent or a third party pays qualified education expenses for higher education.
- An eligible student must be enrolled at an eligible educational institution.
- The eligible student is yourself, your spouse or a dependent you list on your tax return.
Tuition and Fees Deduction
You may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.
The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction, reported on Form 8917, Tuition and Fees Deduction, is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if, for example, you cannot take the lifetime learning credit because your income is too high.
You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax.
Generally, you can claim the tuition and fees deduction if all three of the following requirements are met:
- You pay qualified education expenses of higher education.
- You pay the education expenses for an eligible student.
The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return.
You cannot claim the tuition and fees deduction if any of the following apply:
- Your filing status is married filing separately.
- Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
- Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return).
- You were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens.
- You or anyone else claims an education credit for expenses of the student for whom the qualified education expenses were paid.
Student-activity fees and expenses for course-related books, supplies and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.
Student Loan Interest Deduction
Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, if your modified adjusted gross income (MAGI) is less than $75,000 ($150,000 if filing a joint return), there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntary interest payments.
For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. This deduction can reduce the amount of your income subject to tax by up to $2,500.
The student loan interest deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Form 1040’s Schedule A.
Qualified Student Loan
This is a loan you took out solely to pay qualified education expenses (defined later) that were:
- For you, your spouse, or a person who was your dependent when you took out the loan.
- Paid or incurred within a reasonable period of time before or after you took out the loan.
- For education provided during an academic period for an eligible student.
Loans from the following sources are not qualified student loans:
- A related person.
A qualified employer plan.
Qualified Education Expenses
For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. They include amounts paid for the following items:
- Tuition and fees.
- Room and board.
- Books, supplies and equipment.
Other necessary expenses (such as transportation).
The cost of room and board qualifies only to the extent that it is not more than the greater of:
- The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or
The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.
Business Deduction for Work-Related Education
If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses is greater than 2% of your adjusted gross income. An itemized deduction may reduce the amount of your income subject to tax.
If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. This may reduce the amount of your income subject to both income tax and self-employment tax.
Your work-related education expenses may also qualify you for other tax benefits, such as the tuition and fees deduction and the lifetime learning credit. You may qualify for these other benefits even if you do not meet the requirements listed above.
To claim a business deduction for work-related education, you must:
- Be working.
- Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee.
- File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed.
Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education, below.
Qualifying Work-Related Education
You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests:
- The education is required by your employer or the law to keep your present salary, status or job. The required education must serve a bona fide business purpose of your employer.
The education maintains or improves skills needed in your present work.
However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it:
- Is needed to meet the minimum educational requirements of your present trade or business or
Is part of a program of study that will qualify you for a new trade or business.
You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree.
Education Required by Employer or by Law
Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. This additional education is qualifying work-related education if all three of the following requirements are met.
- It is required for you to keep your present salary, status or job.
- The requirement serves a business purpose of your employer.
The education is not part of a program that will qualify you for a new trade or business.
When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work.
Education to Maintain or Improve Skills
If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. This could include refresher courses, courses on current developments and academic or vocational courses.
New York State Benefits
You can take either a tax credit or an itemized tax deduction for allowable college tuition expenses. The expenses must be for undergraduate study, paid by you as a taxpayer, on behalf of yourself, your spouse, or your dependents, to enroll or attend qualifying in- or out-of-state institutions of higher education.
The college tuition credit is a tax credit allowed for qualified college tuition expenses paid for an eligible student. For taxpayers with allowable expenses of $5,000 or more, the credit equals the applicable percentage of qualified tuition expenses multiplied by 4 percent. The maximum amount of allowed qualified college tuition expenses is $10,000; therefore, the maximum tuition credit is $400 per eligible student.
If your total qualified college tuition expenses for all eligible students total less than $5,000, the credit is equal to your qualified college tuition expenses or $200, whichever is less.
The college tuition itemized deduction is equal to the amount of your qualified college tuition expenses paid, up to a maximum deduction of $10,000 for each eligible student.
Qualifying tuition expenses are defined as net of scholarships or financial aid. Institutions of higher education include business, trade, technical or other occupational schools, recognized and approved by the Regents of the University of the State of New York, or a nationally recognized accrediting agency accepted by the Regents, which provides a course of study leading to the granting of a postsecondary degree, certificate or diploma.
The Federal government also offers tax credits and deductions in the form of the American Opportunity Tax Credit and the Federal Education Loan Interest Deduction.
Consult your tax advisor for more detailed information.
New York’s 529 College Savings Program Direct Plan provides a flexible, convenient, and low-cost way to save for college. The Program features a wide range of investment choices, tax-free withdrawals when used for qualified higher education expenses, and contributions that are tax-deductible (up to certain limits) for New York State residents. You can use this investment to pay for tuition, room and board, books, supplies, and other qualified higher education expenses.
State income tax benefits
Withdrawals are exempt from New York State income tax when used for qualified higher education expenses. New York taxpayers can also deduct up to $5,000 of contributions ($10,000 for a married couple filing jointly) on their state income tax return each year. If you are a resident or taxpayer of the another state, you should consider whether that state offers a 529 plan with tax advantages or other benefits that are not available through this Program.
Federal income tax benefits
Your assets grow tax-deferred, and withdrawals are exempt from federal income tax, as long as they’re used for qualified higher education expenses. Contributions to a 529 college saving plans are not deductible for federal income tax purposes.
Gift tax incentive
You can contribute up to $14,000 a year (or $28,000 if married filing jointly) without incurring gift taxes. Or you can choose a special election that allows you to treat a single $70,000 contribution ($140,000 for married couples) as if it were made over a 5-year period.*** Gifts in excess of these amounts may be subject to federal gift tax. For more information, consult a qualified tax advisor.
Rollover penalty
A rollover of assets from your account in the Program to a qualified education savings program in another state is subject to New York State income tax on earnings, as well as the recapture of all previous New York State tax deductions made during the life of the account.
Saving for College
While financial aid may be available to help pay college costs, students and their families should contribute as much as they can. With the increasing cost of higher education, saving for college becomes even more important. The more you save, the less you will need to borrow (if at all) to pay for college! It’s a good–no a great–idea to start saving now! Think you can’t afford it? Try paying yourself first. When you pay your monthly bills, write out a check to you, and deposit it into your savings account. If you lack the discipline to do this, find out if direct deposit is available through your employer. With direct deposit, a specified dollar amount is deducted directly from your paycheck and credited to your savings account at a bank, credit union, or other savings institution. Once you get started on a regular savings program, you’ll be surprised to see how quickly your account balance grows.
Savings Options
You have a variety of options for saving for college. Below is information about some of those options. Traditional savings and investments options: For younger children, consider mutual funds. A mutual fund invests in many different areas with a goal in mind. Some mutual funds are growth, others give you an income. A professional fund manager manages a mutual fund with the goal in mind and invests accordingly. As an investor, you purchase shares in a mutual fund like you would with stocks. If you have less than five years to save, traditional savings accounts, money market accounts, and certificates of deposit can help you set aside money for school.
Education funding accounts
Education IRAs, also called Coverdell Education Savings Accounts, are tax-deferred accounts that allow you to save up to $2,000 a year per child. Earnings can be withdrawn tax-free when used for the child’s education. Custodial Accounts are set up in the child’s name. Earnings are taxed at the child’s marginal tax bracket, rather than yours. Prepaid Tuition Plans are college savings plans that rise in value at the same rate as college tuition. 529 College Savings Plans are tax-deferred accounts with high contribution limits and no parental income restrictions.
Making Your Decision
Be sure to plan ahead and make wise decisions when you choose your savings options. Check with your financial advisor, accountant, banking institution, or credit union for more information. Also, view the Start Now! Saving for College and Introduction to 529 College Savings Plan webcasts for more information. When looking at the various options, you want to consider a few things: The age of the student to attend college: The younger the student, the more aggressive you can be. As the student becomes older, you will want to begin reducing risk. Within a few years of college, you may want to shelter your returns and ensure you have access to the funds when you need them. Your risk tolerance: Investments have various degrees of risk. You need to decide if you will be comfortable investing in something that may decrease in value in the short term while you wait for it to increase over the long term. You may prefer an investment with guaranteed returns. Investing in your name or the student’s name: Think carefully before putting money in the student’s name. Student’s assets can weigh more than the parents when the school determines eligibility for financial aid.
Tax benefits: If the asset is in the student’s name, the income may be taxed at a lower rate than the parents’ tax rate. Many savings plans grow tax free until withdrawal.
Frequently Asked Questions
Who can invest in New York’s 529 College Savings Program Direct Plan?
New York’s 529 College Savings Program Direct Plan is open to any U.S. citizen or resident alien who has a valid Social Security number or taxpayer identification number. You must have a valid residential address that is not a post office box. The person on whose behalf you’re opening the account (the beneficiary) must also be a U.S. citizen or resident alien with a valid Social Security number or taxpayer identification number. There are no income restrictions or state residency requirements.
Does the money have to be used at a college in New York State?
No. The money from your account in New York’s 529 College Savings Program Direct Plan can be used to pay for tuition, fees, books, room and board, supplies, and other qualified higher education expenses at any eligible post-secondary school in the United States and abroad. This includes most colleges, universities, graduate schools, and vocational schools.
Are contributions tax-deductible?
New York State taxpayers can deduct up to $5,000 of contributions to their Program account ($10,000 for a married couple filing jointly) on their state income tax return each year. However, contributions are not deductible for federal income tax purposes. For more information on 529 plans you could visit www.nysaves.org.