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Graduate Students and Tuition Tax Benefits

Since President Clinton first enacted tax credits for college tuition in the late 1990s, lawmakers have expanded these policies, which now amount to over $20 billion in annual aid. While these benefits are commonly described as helping families pay for college, which usually means a two-year or four-year degree, they also apply to graduate and professional education. 

These students are eligible for two tuition tax benefits that undergraduates may also claim: the $2,000 Lifetime Learning Credit (the Lifetime Credit) and the $4,000 Tuition and Fees Deduction (the deduction). In Graduate Students and Tuition Tax Benefits we analyze which graduate students can claim these benefits and how much they can claim, revealing some little-known facts. Some of the key findings are: 

  • A greater share of graduate students are eligible for tax benefits as compared to undergraduates; 
  • Over half of graduate students earning above $106,000 were eligible for a tax benefit, which is 3.8 percent of graduate students; 
  • Students pursuing degrees linked to public service, such as a master’s of education or social work, have the highest rates of eligibility at nearly 90 percent, while those enrolled in research PhD programs have the lowest rate of eligibility at 49 percent; 
  • Graduate students attending for-profit schools qualify for the largest benefits, compared with students at public and nonprofit schools; 
  • Undergraduates are eligible for much larger tax benefits than graduate students on average, because they may claim the American Opportunity Tax Credit and graduate students cannot. Should the AOTC expire in 2017 as scheduled, tax benefits for the two groups would move close to parity, although higher income graduate students would qualify for slightly larger benefits than undergraduates in that category; 
  • Graduate students who work while attending school are more likely to qualify for tax benefits and receive larger-than-average tax benefits because their earnings are high enough that they have more federal tax liability to offset. Students who generally attend full-time, such as law students, have some of the lowest rates of eligibility for tax benefits.

The full report can be accessed here.