Tax Breaks Students (and Parents) Can Claim for 2025

Here’s an updated look at what the IRS considers qualified education expenses for tax year 2026, and what other tax breaks are available for those investing in higher education.

Note: The One Big Beautiful Bill (OBBB) is now also being referred to by lawmakers as the Working Families Tax Cuts Act. You may see one or both names used here, but they refer to the same set of tax changes.

Education tax credits available for college students

There are two federal higher education credits: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). You can claim either on Form 8863.

Each credit has different rules, but both require qualified education expenses for an eligible student at an eligible educational institution.

You generally need Form 1098-T from the school. Exceptions apply when the school isn’t required to furnish the form, or you follow IRS steps to request it before filing. See the IRS education credits overview.

American Opportunity Credit vs. Lifetime Learning Credit

Details	American Opportunity Credit	Lifetime Learning Credit
Who can claim it	Eligible taxpayers for themselves, their spouse, or a dependent student who meets the AOTC requirements	Eligible taxpayers for themselves, their spouse, or a dependent student in undergraduate, graduate, vocational, or qualifying job-skills courses
Full credit amount	Up to $2,500 per eligible student (100% of the first $2,000 + 25% of the next $2,000)	Up to $2,000 per return (20% of the first $10,000 of qualified tuition and fees)
Modified adjusted gross income (MAGI) limits for credit	Joint: phaseout $160,000–$180,000; no credit at $180,000+ Other filers (not MFS): $80,000–$90,000; no credit at $90,000+	Same as AOTC
Course and enrollment requirements	At least half-time enrollment for one qualifying academic period in a degree or recognized credential program; the student must not have completed the first four years of postsecondary education before the tax year begins	At least one course toward a degree or recognized credential, or to acquire or improve job skills; no half-time enrollment requirement
How often can you claim it?	Four tax years per student max	Unlimited years
Refundable?	Up to 40% ($1,000 maximum) may be refundable; restrictions apply to certain students under age 24	Nonrefundable

Who claims these credits: students or parents?

The person who claims the student as a dependent is generally the one who can claim the education credit. If you claim the student, you may qualify for the AOTC or LLC, even if the student or someone else paid the qualifying expenses, including with student loans. In this case, the student can’t claim the credit on their own return.

However, if no one claims the student as a dependent, the student may claim the credit themselves if they meet the other eligibility requirements. This applies even if a parent or someone else could claim the student but chooses not to.

What are qualified education expenses?

American Opportunity Credit qualified higher education expenses

Tuition and fees that are required for enrollment or attendance
Books, supplies, and equipment needed for the course of study (even if not bought from the school)

Lifetime Learning Credit qualified higher education expenses

Tuition and fees that are required for enrollment or attendance
Course-related books, supplies, and equipment only if payment to the institution is required as a condition of enrollment or attendance

What college costs are NOT considered qualified education expenses?

Room and board, insurance, medical costs, student health fees, transportation, and similar personal or living expenses do not qualify for AOTC or LLC, even if the school requires payment.

For AOTC, sports, games, hobbies, and noncredit courses qualify only if they are part of the student’s degree program. However, for LLC, these courses may qualify if they help the student acquire or improve job skills or are part of the degree program.

Tax deduction for college students

In addition to education tax credits, the student loan interest deduction can provide a tax break for eligible borrowers who pay interest on qualifying education loans.

The student loan interest deduction

You may deduct interest paid on qualifying student loans as an adjustment to income, without itemizing. You must also be legally obligated to pay interest on the loan. Additionally, neither you nor your spouse, if filing jointly, may be listed as a dependent on someone else’s return. The loan must have been taken out solely to pay qualified education expenses for you, your spouse, or someone who was your dependent when you took out the loan, and the student must have been enrolled at least half-time.

You can deduct up to $2,500 or the interest you actually paid in the tax year, whichever is less. You typically should receive Form 1098-E from a lender or loan servicer that received $600 or more in student loan interest from you during the year. You may still deduct eligible interest below that amount, even if you do not receive the form.

For tax year 2026, the deduction phases out for modified AGI between $85,000 and $100,000 (single, head of household, or qualifying surviving spouse) and $175,000 and $205,000 (married filing jointly). Married filing separately can’t claim this deduction.

FAQs

Did education credits change for 2026?

For 2026, credit dollar amounts and MAGI phaseouts are the same as in 2025: up to $2,500 per eligible student for AOTC and $2,000 per return for LLC. Beginning with tax year 2026, the taxpayer claiming either credit or at least one spouse on a joint return must have a Social Security number valid for employment and issued before the return’s due date, including extensions. A dependent student for whom the credit is claimed must also meet this SSN requirement.

An ITIN does not satisfy the new SSN requirement. However, a joint return may qualify if one spouse has an ITIN and the other meets the SSN requirement.

For AOTC, you must also include the school’s employer identification number (EIN) on Form 8863. This is an existing requirement, not a new rule for 2026. The school’s EIN is not required to claim LLC.
Missing or incorrect required identification information can result in the IRS disallowing the credit.

If all my classes are online, can I deduct my internet bill as an education expense?

Home internet charges generally do not qualify for AOTC or LLC. A mandatory technology or connectivity fee paid to the school may qualify if it meets the credit’s qualified-expense rules. Separate rules apply to 529 plans, which may cover internet access used primarily by the beneficiary while enrolled at an eligible postsecondary school.

Is my computer a qualified education expense?

For AOTC, a computer may qualify if it is needed for the student’s course of study or attendance at the eligible institution, even if purchased elsewhere. For LLC, it qualifies only if purchasing it from the institution is required as a condition of enrollment or attendance.

Can I claim educational tax credits even if I paid for my college expenses with student loans?

Yes. Loan proceeds used for qualified expenses can support the credit.

Can I claim educational tax credits if I received financial aid?

Yes, if you have qualifying expenses remaining after subtracting tax-free aid allocated to those expenses. For example, $10,000 of expenses eligible for the credit minus $5,000 of tax-free Pell Grant funds and $3,000 of tax-free scholarship funds applied to those expenses leaves $2,000 for calculating the credit. That could produce an AOTC of up to $2,000 or an LLC of up to $400, subject to eligibility, income, and tax-liability limits.

If the aid’s terms permit, allocating some grant or scholarship funds to living expenses and treating that amount as taxable income may increase the education credit. You also cannot use the same expenses for both an education credit and a tax-free 529 or Coverdell withdrawal.

Can I claim both education credits?

You can’t claim the AOTC and the LLC for the same student in the same tax year. You may claim both on one return (e.g., AOTC for one student, LLC for another). For one student, the AOTC is usually better if you qualify.

I’m a parent of a student. Can I take the student loan interest deduction?

Yes, if you paid interest on a qualified student loan, you are legally obligated to repay it and to meet the income, filing status, and other eligibility requirements. The student must have been your dependent when you took out the loan and enrolled at least half-time. Neither you nor your spouse, if filing jointly, may be listed as a dependent on someone else’s return. Paying interest on a loan solely in your child’s name does not make it deductible on your return. Use the 2026 phaseout ranges in the student loan section above.

What happened to the college tuition and fees deduction?

The tuition and fees deduction expired Dec. 31, 2020. Unfortunately, this deduction isn’t available to taxpayers filing their federal returns for tax year 2026.

The bottom line

College costs add up fast, but the right federal tax breaks can take some of the sting out of tuition bills and student loan payments. The American Opportunity Tax Credit and Lifetime Learning Credit can offset qualified tuition and fees on Form 8863, and many borrowers can also deduct up to $2,500 in student loan interest without itemizing. Match the credit to the student’s situation, keep Form 1098-T and loan statements handy, and remember you can’t claim both education credits for the same student in the same tax year.

When you’re ready to file your federal return, e-file with TaxAct® and we’ll walk you through step-by-step questions to see which education tax breaks you qualify for as a student or parent.

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.

Citations

Internal Revenue Service. Form 1098-E, Student Loan Interest Statement. Internal Revenue Service, www.irs.gov/pub/irs-pdf/f1098e.pdf. Accessed 22 Oct. 2026.
Internal Revenue Service. Form 1098-T, Tuition Statement. Internal Revenue Service, www.irs.gov/pub/irs-pdf/f1098t.pdf. Accessed 22 Oct. 2026.
Internal Revenue Service. Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). Internal Revenue Service, www.irs.gov/pub/irs-pdf/f8863.pdf. Accessed 22 Oct. 2026.

Tax Breaks Students (and Parents) Can Claim This Year