Introduction

This publication explains tax benefits that may be available to you if you are saving for or paying higher education costs for yourself or another student.

What is in this publication. Two tax credits for which you may be eligible are explained in chapters 1 and 2. These benefits, which reduce the amount of your income tax, are:

• The Hope credit, and
• The lifetime learning credit.

Seven other types of benefits are explained in chapters 3 through 8. With these benefits, you may be able to:

• Deduct student loan interest,
• Receive tax-free treatment of canceled student loans,
• Establish and contribute to a Coverdell education savings account (ESA) (formerly education individual retirement arrangement (IRA)) which features tax-free earnings,
• Make withdrawals from traditional or Roth IRAs for education costs without paying the 10% additional tax on early withdrawals,
• Cash in savings bonds for education costs without having to pay tax on the interest,
• Receive tax-free educational benefits from your employer, and
• Participate in a qualified tuition program.

Note. You generally cannot claim more than one of the benefits described in the lists above for the same qualifying education expense.

Comparison table. Some of the features of each of these benefits are highlighted in Appendix B on page 42 of this publication. This general comparison table may guide you in determining which benefits you may be eligible for and which chapters you may want to read.

Analyzing your tax withholding. After you estimate your tax benefits for higher education for the year, you may be able to reduce the amount of your federal income tax withholding. Also, you may want to recheck your withholding during the year if your personal or financial situation changes. See Publication 919, How Do I Adjust My Tax Withholding, for more information.

What is not in this publication. Some educational benefits are not covered in this publication.

Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.

You can e-mail us while visiting our web site at
www.irs.gov.

You can write to us at the following address:

Internal Revenue Service
Technical Publications Branch
W:CAR:MP:FP:P
1111 Constitution Ave. NW
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

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