Council on Postsecondary Education
MILLIONS OF DOLLARS OF EDUCATION TAX CREDITS AND TUITION DEDUCTIONS UNUSED IN KENTUCKY
(FRANKFORT, Ky.) -– Qualifying college students and their families are urged to claim federal and state education tax credits and tuition deductions when they file their income tax returns. According to data reviewed by the Council on Postsecondary Education, it is estimated that millions of dollars of tax credits and tuition deductions go unclaimed in Kentucky.
“The tuition tax credit encourages more Kentuckians to attend our colleges and universities,” said Governor Fletcher. “It is another useful tool to ease the burden of educational costs for Kentucky families.”
Research from the Tax Policy Center, a Washington D.C. joint venture of the Urban Institute and the Brookings Institution, suggests a third of eligible families do not take advantage of federal education tax benefits. In Kentucky, this could translate to millions of dollars in discounts that could alleviate some college costs, particularly for middle-income families.
“Getting a college education opens the door to limitless opportunities for Kentucky’s students,” said Kentucky Education Secretary Laura Emberton Owens. “We want to remind parents of those attending college that these tax credits are available to help offset the cost of higher education.”
Tax credits reduce federal income taxes on a dollar for dollar basis, while tuition and fees deductions reduce taxable income. The Hope credit and the lifetime learning credit are two federal incentives available to students and families who meet certain income limits. Kentuckians also can claim up to $500 for qualified tuition and related educational expenses through the Kentucky Tuition Education Tax Credit. Form 8863-K (29K PDF) from Kentucky’s Department of Revenue provides more information on this valuable education tax credit.
Each year, college and universities are required to send students an IRS Form 1098-T (60K PDF) that provides information on qualifying education expenses. Students taking credit classes at least half-time during one semester typically receive the form.
According to data from the Internal Revenue Service, in tax year 2004, approximately 81,000 Kentucky federal tax returns claimed $67 million in education tax credits, an average tax credit of $830 per return. In addition, approximately 46,000 Kentucky federal tax returns generated $112 million in tuition and fees deductions, an average deduction of $2,418 per return. In tax year 2005, approximately 32,000 Kentucky state tax returns claimed $7.8 million in tuition tax credits.
Colleges and universities do not give tax advice, so those interested in taking advantage of these education benefits should contact the IRS at 1-800-829-1040, through their website at www.irs.gov [e.g., Form 8863, Education Credits (82K PDF), Publication 970, Tax Benefits for Higher Education (368K PDF)], or consult a tax expert for more information.
Kentucky’s postsecondary and adult education system is improving the economic vitality of the Commonwealth and the lives of Kentuckians. By raising educational attainment to the national average by 2020, Kentucky will attract higher wage and knowledge-based business and industry and the overall quality of life for Kentuckians will improve with higher incomes and levels of employment, better health, less obesity, more volunteerism, and lower crime and public assistance rates.