The federal government provides several ways in which your income tax burden can be reduced when you or your parents pay for a college education. Information regarding these benefits can be found in the Federal Tax Benefits section and for additional details, please go to the IRS website or call 800-TAX-1040. You should request publication 970.
There are also New York State benefits where you can take either a tax credit or an itemized tax deduction for allowable college tuition expenses. The expenses must be for undergraduate study, paid by you as a taxpayer, on behalf of yourself, your spouse, or your dependents, to enroll or attend qualifying in- or out-of-state institutions of higher education.
In addition to providing tax breaks some forms of financial aid are considered taxable income. Federal Work-Study earnings are just like income from any job. They are taxable income. Grants and scholarships can also be taxable income. You should save all your receipts for tuition, fees, books and supplies and consult a tax advisor to determine your tax liability.