Tax benefits

Federal and state tax credits and deductions are another source of government-provided financial aid. Congress has made many changes to the Internal Revenue Code to help taxpayers with their higher education expenditures. The State of Minnesota also allows credits and deductions against state income taxes.

Credits and deductions

Hope Tax Credit: A federal tax credit of up to $1,500 per student for qualified tuition and related expenses for the first two years of an eligible student's post-secondary education if the student is enrolled at least half-time in a program that leads to a degree, certificate, or other recognized educational credential.
Lifetime Learning Tax Credit: A federal tax credit of 20 percent of the first $5,000 of qualified and related expenses paid.
Deduction for Higher Education Expenses: A federal tax deduction for qualified tuition and related expenses, even for those who do not itemize their deductions.
Student Loan Interest Deduction: A federal tax deduction of up to $2,500 on student loan interest paid.
Employer Provided Educational Assistance: Up to $5,250 in education benefits paid by the student's employer are tax-free.

Federal and state savings

529 College Savings Plan: A plan to encourage students and families to save for college. It is outlined in Section 529 of the Internal Revenue Service Code. State- or education institution-operated 529 plans offer tax benefits to qualified savers.
Minnesota College Savings Plan: The state will provide a matching grant to eligible Minnesota families contributing at least $200 during the year. Minnesota families with income of $50,000 or less may be eligible for a grant of up to 15 percent of their contributions, up to a maximum of $300. Families with income between $50,001 and $80,000 may be eligible for a matching grant of up to 5 percent to a maximum of $300. For more information see the Plan Overview.

For more information about tax education benefits, see the Minnesota Office of Higher Education program descriptions.