Online Postsecondary Education and the Higher Education Tax Benefits: An Analysis with Implications for Tax Administration
This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.
Chapter in forthcoming NBER book Tax Policy and the Economy, Volume 32, Robert A. Moffitt, editor
Online postsecondary education is growing rapidly and increasingly dominates the use of the tax benefits for higher education: the American Opportunity Tax Credit, the Lifelong Learning Credit, and the Deduction for Tuition and Fees. Because online education does not closely resemble "brick-and-mortar" residential college education aimed at 18 to 23 year olds, it presents new challenges and opportunities for administering the tax benefits for higher education. In this paper, I combine tax data with administrative data from the U.S. Department of Education for cross-validation, to study compliance, and to gain understanding of how online schools and students use tax benefits for higher education. I also analyze take-up of the tax benefits and how they affect earnings. The findings suggest several practical implications for the administration of the tax benefits, including form revisions, federal data coordination, and novel uses of earnings data to target compliance reviews.