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Online Postsecondary Education and the Higher Education Tax Benefits: An Analysis with Implications for Tax Administration

In: Tax Policy and the Economy, Volume 32

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  • Caroline M. Hoxby

Abstract

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 US 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 changes in earnings from before enrollment to after enrollment. 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Caroline M. Hoxby, 2018. "Online Postsecondary Education and the Higher Education Tax Benefits: An Analysis with Implications for Tax Administration," NBER Chapters, in: Tax Policy and the Economy, Volume 32, pages 45-106, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14004
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    1. Hoxby, Caroline M. & Bulman, George B., 2016. "The effects of the tax deduction for postsecondary tuition: Implications for structuring tax-based aid," Economics of Education Review, Elsevier, vol. 51(C), pages 23-60.
    2. Caroline M. Hoxby, 2014. "The Economics of Online Postsecondary Education: MOOCs, Nonselective Education, and Highly Selective Education," American Economic Review, American Economic Association, vol. 104(5), pages 528-533, May.
    3. George B. Bulman & Caroline M. Hoxby, 2015. "The Returns to the Federal Tax Credits for Higher Education," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 13-88.
    4. David J. Deming & Claudia Goldin & Lawrence F. Katz & Noam Yuchtman, 2015. "Can Online Learning Bend the Higher Education Cost Curve?," American Economic Review, American Economic Association, vol. 105(5), pages 496-501, May.
    5. Michael S. McPherson & Lawrence S. Bacow, 2015. "Online Higher Education: Beyond the Hype Cycle," Journal of Economic Perspectives, American Economic Association, vol. 29(4), pages 135-154, Fall.
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