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Posted by Tiffany Gaskin

Can You Deduct College Entrance Exam Fees on Your Taxes?

Can You Deduct College Entrance Exam Fees on Your Taxes?

Unfortunately for guardians, moms and dads, you cannot deduct the fees for the ACT, SAT and several other entrance examinations for colleges. However, you get some educational tax credits and deductions that can help offset all expenses for college expenses for a student in college.


Deduction of Expenses 

It is possible to claim tuition and deduction of fees for college expenses that you, your kid or your spouse incurred through 2020. This was, however, suspended by Congress for 2021, except there will be an extension. 

  • You need not itemize to get this deduction, and it can take care of compulsory college expenses and tuition till the minimum threshold that Uncle Sam established for the current tax year.

  • An example of compulsory expenses is the student activity fee, if compulsory for all students.

  • For some taxpayers over a particular income level, this deduction is half as the income level progresses; such deduction phases out.

Lifetime Learning Credit 

With the Lifetime Learning Credit, you can claim 20% of your college expenses (out of pocket) for you, your spouse and your kids. 

  • The maximum credit one can claim is $2000, even if the entire college expense for the whole family amounts to $8,000.

  • One can claim the Lifetime Learning Credit for as long as the student is enrolled in college. It can be claimed for undergraduate and postgraduate degrees, not minding if the student attends a single class per year.

  • Publication 970 details a list of other tax credits that Uncle Sam allows

There is a couple of restriction to the Lifetime Learning Credit

  • Uncle Specifies some colleges as "Qualified College", and the student needs to attend such to qualify for the credit. Only qualified colleges can take part in the Educational Department Student Aid Program.

  • If the annual income is more than the limit Uncle Sam established for the specific tax year, one cannot claim the credit. Also, married people filing separately cannot claim the credit.

  • While the maximum credit is $2,000, it cannot be refunded

American Opportunity Credit 

Another opportunity for students and their parents to get some relief for their college expenses is via the American Opportunity Tax Credit. Taxpayers get immense advantage compared to a tuition deduction as you get a dollar-for-dollar reduction, and not simply reducing the income amount that will be taxed, 

There are some requirements for qualifications, however, explained below:

  • Only students that are yet to complete the first four years of their post-secondary education are eligible

  • The student must be enrolled in one academic semester at least for the tax year

  • It is also essential to maintain half time status in a program that will lead to either a degree or other certification

  • Students convinced for drugs or other criminal activities, either at the state or federal level, are not qualified for the tax credit

The most profitable is the American Opportunity Credit, as taxpayers can get up to 40% of the credit as refunds.  This means you still get some funds back if you owe no tax.


Claiming Education Credits 

On filing your return, IRS Form 8863 is the form to claim these education tax credits.

  • The credit is only possible for out of pocket expenses. Grants or benefits must not cover such credits.

  • For each student, you can only claim one credit or deduction on your return

  •  There is no provision to claim credits or deductions for medical expenses, health fees for students, room, boards, insurance or transport, even if such fees are compulsory. 



Tiffany Gaskin
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