The Help Desk

Your tough questions. MONEY's smart answers.
Presented by

Can we get a tax deduction for college costs?

December 16, 2011: 10:10 AM ET

We paid $25,000 for our son's college costs this fall. Can we get a tax deduction? —Name Withheld, Albany, N.Y.

Yes, you can—but you're better off taking a tax credit instead. The American Opportunity Tax Credit gives you a dollar-for-dollar re­duc­tion in your tax bill for up to $2,500 annually in college expenses per student. The tuition and fees deduction lowers your taxable income by up to $4,000. Since the de­duc­tion is smaller for high earners, it will cut your taxes $560 at most if you're in the 28% tax bracket.

The fine print: With both tax breaks, income limits apply. The AOTC's is $180,000 if you file jointly, and it starts phasing out at $160,000. You can't take both a credit and a tuition deduction for the same student in the same year (though you can still deduct student-loan interest). Also, the credit doesn't apply to expenses you cover with a 529 plan or scholarship.

-- Donna Rosato

Got a question for the help desk? Send it to

Posted in: Family Money
Join the Conversation
Help Desk

Got a question about your money? We want to hear it! Each week we're answering your questions on CNN, Headline News and

Your email or phone number won't be published; we'll use it to get in touch if we need more information about your question.
Help Desk Video
  • NEXT
    Not enough money in America's 401(k)s
    Despite the surging stock market bringing balances to record highs, the average Fidelity 401(k) account has less than $100,000 in it. That's just not enough. Play
  • NEXT
    Explaining Obama's myRA
    President Obama unveiled a new savings plan for retirement accounts, aimed at encouraging people to start building their nest egg. But how exactly does it work? Play
  • NEXT
    Tricks on how to save in your 20s
    Saving for your retirement in your 20s doesn't have to be a financial burden. Prioritizing your expenses is usually the first step in building a nest egg. Play
  • BACK
    Don't get fooled by Black Friday sales
    Here are some of the tricks that retailers use to make you think you're getting a deal. Keep an eye out for them while shopping this Black Friday. Play
Best Tips
Some of the nation's leading business owners, investors, and thinkers share their thoughts on rebuilding your wealth. More
These strategies can help you manage the challenges -- both emotional and financial -- of helping an aging parent from afar. More
You don't need to be fanatical to get to 780. Those in the know say these moves matter most. More
Featured Newsletters

Tips for saving and spending smarter.

Search This Column
View all entries from this: Week, Month
Help Desk
More help for your career, your investments and your budget.
Powered by VIP.