Introduction

This publication explains the tax benefits for persons who are saving for or paying higher education costs for themselves and members of their families. It covers the following topics.

• The Hope credit.
• The lifetime learning credit.
• The deduction of student loan interest.
• Canceled student loans.
• Education individual retirement arrangements (education IRAs).
• Withdrawals from traditional or Roth IRAs for the costs of higher education.
• The exclusion of savings bond interest used to pay the costs of higher education.
• Employer-provided educational assistance benefits.
• Qualified state tuition programs.

You generally cannot claim more than one benefit for the same education expense.

Appendix B on page 34 gives you a general comparison of some features of the different benefits. You may find it helpful in determining the benefits for which you are eligible.

This publication does not cover the itemized deduction you may be able to claim for work-related educational expenses. Information on that deduction can be found in Publication 508, Tax Benefits for Work-Related Education. This publication also does not cover scholarships that you may be able to exclude from your income. Information on scholarships can be found in Publication 520, Scholarships and Fellowships.

You may be able to reduce the amount of your federal income tax withholding throughout the year based on your estimated tax benefits for higher education. After you figure the amount of your estimated 2001 income, exclusions, deductions, and credit(s), see Publication 919, How Do I Adjust My Tax Withholding?

Caution. You should check your withholding again during the year if there are changes to your personal or financial situation that would affect your expected 2001 tax liability, including your allowable higher education tax benefits.

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/help/email2.html.

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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