	Introduction

Since 1997, education tax benefits have become an increasingly important component of federal higher education policy. For the 2017 tax year, 14 tax benefits are available for college students and their parents to help pay for higher education (see Table 1 ). In 2018, this number falls to 11, as the personal exemption for dependents (including college-age dependents) and deduction for work-related business education expenses are temporarily suspended (through the end of 2025), and the tuition and fees deduction will have expired. The available tax benefits are a mixture of credits, deductions, exclusions, and other incentives. The benefits can be placed into one of three general categories: incentives for current year expenses, preferential tax treatment of student loans, and incentives for saving for college. The Joint Committee on Taxation (JCT) estimates the cost to the federal government of education tax benefits—the revenue foregone from offering these benefits—to be $168.5 billion over the 2016-2020 window. This report provides a brief overview of the higher education tax benefits that are currently available to students and their families. Tax Benefits Versus Traditional Student Aid

The federal government provides individuals with financial assistance for higher education expenses in two ways: tax benefits and traditional student aid (loans, grants, and work-study assistance). Between 1954 and 1996, eight tax benefits for education were enacted: 
1. an exclusion for scholarships, fellowships, and tuition reductions; 2. a parental exemption for students ages 19 to 23 who were enrolled in college; 3. a business expense deduction for work-related education; 4. an exclusion for employer-provided education assistance; 5. an exclusion for the interest earned on educational savings bonds; 6. an exclusion of qualifying cancelled student loans from taxable income; 7. an unlimited gift tax exclusion for amounts paid by a donor directly to an educational institution for tuition payments on behalf of the donee; and 8. an exclusion of the earnings from qualified tuition programs (QTPs), also known as Section 529 Plans. The tuition and fees deduction was scheduled to expire at the end of 2005. The benefits can be divided into three groups: incentives for current year higher education expenses, incentives that provide preferential tax treatment of student loan expenses, and incentives for saving for college.
The federal government provides financial assistance to individuals for higher education expenses in two major ways: tax benefits and traditional student aid (loans, grants, and work-study assistance). Since 1997, education tax benefits have become an increasingly important component of federal higher education policy. In 2017, 14 tax benefits are available for college students and their parents to help pay for higher education. The available tax benefits are a mixture of credits, deductions, exclusions, and other incentives. The Joint Committee on Taxation (JCT) estimates the cost to the federal government of education tax benefits—the revenue foregone from offering these benefits—to be $142 billion between 2017 and 2021.
This report provides a brief overview of the higher education tax benefits that are currently available to students and their families. These tax benefits can be divided into three groups:
1. incentives for current year expenses, 2. incentives for preferential tax treatment of student loan expenses, and 3. incentives for saving for college.
In 2017, incentives for current expenses include two tax credits: the American Opportunity and Lifetime Learning tax credits; two deductions: an above-the-line deduction for tuition and fees and a deduction for work-related education expenses; two exclusions: an exclusion for scholarships, fellowship income, and tuition reductions, and an exclusion for employer-provided education benefits; and a personal exemption for student dependents aged 19 to 23. Under current law the tuition and fees deduction expired at the end of 2017 and the personal exemption (including for student dependents aged 19 to 23) is temporarily suspended from 2018 through the end of 2025.
Tax benefits for student loan expenses include a deduction for interest paid on student loans and an exclusion from income for the amount of forgiven student loans.
College saving tax incentives include Qualified Tuition Plans (529 plans); Coverdell education savings accounts (ESAs); an education savings bond program; withdrawals from individual retirement accounts (IRAs) to pay for college expenses without penalty; and the allowance of uniform transfers to minors. (Both Coverdells and 529s can also be used for certain K-12 education expenses, subject to limitations.)