Tax Benefits for Education

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 interest 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.