Lifetime Learning Credit (LLC): This credit offers up to $2,000 per tax return for qualified tuition and related expenses. Unlike the American Opportunity Tax Credit, the LLC is available for all years of postsecondary education, including graduate studies, and for courses to acquire or improve job skills. There is no limit on the number of years a taxpayer can claim the LLC.
Student Loan Interest Deduction: Graduate students repaying student loans may deduct up to $2,500 of interest paid on qualified student loans, subject to income limitations. This deduction is available even if the taxpayer does not itemize deductions.
Tuition and Fees Deduction: Although this deduction expired at the end of 2020, it has been extended for tax years 2021 through 2025. Eligible taxpayers can deduct up to $4,000 in qualified education expenses, subject to income limitations. This deduction cannot be claimed in the same year as the LLC for the same student.
Tax-Free Scholarships and Fellowships: Amounts received as scholarships or fellowships may be tax-free if they are used for qualified education expenses, such as tuition and required fees, and the recipient is a degree candidate. However, amounts used for room, board, and other non-qualified expenses are taxable.
Employer-Provided Educational Assistance: Employers may offer educational assistance programs that provide up to $5,250 per year in tax-free benefits for employees pursuing graduate education. These benefits can cover tuition, fees, and course materials.
Tax professionals should consult IRS Publication 970, "Tax Benefits for Education," for comprehensive details and ensure that clients meet all eligibility requirements and comply with current tax laws.