Distribution of Education Tax Credits by AGI, 2010

Because the AOTC is partially refundable, 24% of the savings from tax credits went to households with AGI below $25,000 in 2010. Only 3% of the tax deduction benefit went to households in this income category.

Figure 16B: Distribution of Education Tax Credits by Adjusted Gross Income (AGI), 2010 (and Average Tax Savings per Recipient in 2011 Dollars)
Download Data in Excel
See Key Points|See Also Important
Distribution of Education Tax Credits by AGI, 2010
Notes & Sources 
NOTE: Refundable tax credits claimed on all returns are included. For nonrefundable credits and for deductions, only amounts claimed on taxable income tax returns are included. The value of tax deductions is estimated based on applicable marginal tax rates. Available data do not allow separation of independent students from parents of dependent students claiming tax credits and deductions. Percentages may not sum to 100 because of rounding.
 
SOURCES: Internal Revenue Service, Statistics of Income, Tables 1.3, 1.4, 3.3 (2010); calculations by the authors.
Key Points
  • Education tax credits and deductions are “tax expenditures.” They reduce federal income tax liabilities — and federal tax revenues. Their impact on the federal budget is the same as the impact of direct expenditures.
  • The AOTC is available to taxpayers with an AGI as high as $180,000. Of the savings from tax credits, 23% went to households with an AGI of $100,000 or higher in 2010; 60% of the tuition tax deduction benefit went to households with incomes between $100,000 and $160,000.
Also Important
  • In 2010, 7.6 million taxpayers with taxable returns deducted $7.0 billion in student loan interest, generating over $1 billion in savings.
  • Other subsidies to students through the tax code include the personal exemption allowed for students ages 19 and older, which saved parents over $5 billion in 2010, and the excludability of tuition assistance from employers, which saved students about $700 million. Taxpayers saved about $1.5 billion in taxes on the earnings from savings earmarked for education. (Analytical Perspectives, Budget of the U.S. Government, FY 2012, Table 17-1.)