Are College Application Fees Tax Deductible?

March 12, 2024 by Steve Banner, EA, MBA
College Application

Statistics are often used to argue that a college education can have an enormously positive impact on the lives of individuals who pursue that path. This is said to be true no matter whether that education commences right after high school for individuals seeking to establish a future path for themselves or later in life for folks who are planning to improve their employment qualifications or change careers.

According to a recent study1 from College Visions:
 

“Students who earn a college degree stand to make over $500,000 more in their lifetime than those who only attain a high school diploma. Those that earn advanced degrees will make over $1,000,000 more in their lifetime than those who completed high school.”

and

“Although unemployment can strike at any time, earning a college degree significantly lowers the chance of ending up out of work. Most degrees offer some transferable skills that allow individuals to transition to new industries.”


Although statistics can often be used to “prove” almost anything, there is one simple and indisputable fact that any parent or college student would tell you: a college education can cost a lot of money. According to a recent report from the EducationData2 organization:
 

“The average cost of college in the United States is $36,436 per student per year, including books, supplies, and daily living expenses.”

and

“Considering student loan interest and loss of income, the ultimate cost of a bachelor’s degree can exceed $500,000.”


Although these numbers may be quite overwhelming for taxpayers who are faced with paying bills of this size, the good news is that there are a large number of provisions in the tax code that can offset the net cost of college education for an individual. These include:

 

  • Qualified tuition program savings plans
  • Coverdell education savings accounts (ESAs)
  • American opportunity tax credit
  • Lifetime learning tax credit
  • Tax breaks for scholarships and other assistance
  • Employer-provided educational assistance
  • Education tax deduction for the self-employed
  • Early distributions from IRAs
  • Education savings bond program
  • Education tax deduction for student loan interest
  • Education tax breaks for student loan forgiveness

Obviously, we don’t have space within this article to discuss each of these benefits in detail, but they offer benefits to offset the amounts you have spent on college education. These benefits include tax-free earnings on savings, deductions from income, tax credits, and penalty-free withdrawals from your IRA.

The actual college education expenses that qualify for these tax breaks differ slightly from one of the above benefit programs to another, but the common factor amongst them all is that the qualified expenses must be related to a course or study program in which the taxpayer has successfully enrolled. In other words, there is no tax benefit for simply applying to enter a college.

However, many benefits are available, beginning when your application has been accepted and after you enroll to begin your studies. In fact, there are so many benefits available that it can be hard to keep track of them all!

More information can be found on the IRS website in Publication 970: Tax Benefits for Education.3

 

[1] https://collegevisions.org/donate/value-of-a-college-education/
[2] Hanson, Melanie. “Average Cost of College & Tuition” EducationData.org, November 18, 2023,
https://educationdata.org/average-cost-of-college

[3] https://www.irs.gov/pub/irs-pdf/p970.pdf

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Steve Banner, EA, MBA
Tax Content Developer

 

Steve Banner began his career in the field of income tax in 1977 and has since gathered business experience in a variety of countries and cultures. In addition to the United States, he has lived and worked for extended periods in Australia, Saudi Arabia, Canada, and Sweden. Along the way he studied Adult Education and earned a Bachelor of Education, Master of Educational Administration, and MBA. He joined TaxAudit in 2016, where he is a Tax Content Developer.


 

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