Tax Breaks Students (and Parents) Can Claim This Year

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Updated for tax year 2025.

Here’s an updated look at what the IRS considers qualified expenses for education credits in 2025 and what other tax breaks are available for those investing in higher education.

Education tax credits available for college students

There are currently two higher education tax credits for students: the American Opportunity Tax Credit (AOTC or AOC) and the Lifetime Learning Credit (LLC). Both credits can be claimed using Form 8863.

Each credit has different eligibility requirements, but both require the purchase of qualified education expenses for an eligible student enrolled at an eligible educational institution.

American Opportunity Credit vs. Lifetime Learning Credit

DetailsAmerican Opportunity CreditLifetime Learning Credit
Who can claim itUndergraduate students or their parents (if the student is a dependent)Anyone taking higher education classes (undergrads, graduate students, vocational students, etc.)
Full credit amountUp to $2,500 per eligible student (100% of the first $2,000 plus 25% of the next $2,000)Up to $2,000 per return – You can claim 20% of the first $10,000 spent on qualified tuition and fees during the tax year
Modified adjusted gross income (MAGI) limits for creditJoint filers: $180,000 (phase-out begins at $160,000)

Other filers (except married filing separately): $90,000 (phase-out begins at $80,000)
Joint filers: $180,000 (phase-out begins at $160,000)

Other filers (except married filing separately): $90,000 (phase-out begins at $80,000)
Course and enrollment requirementsOnly available for four tax years per eligible studentMust be enrolled in at least one course and does not need to be pursuing a degree or educational credential
How often can you claim it?Only available four tax years per eligible studentAvailable for an unlimited number of years
Refundable?Yes – up to 40% ($1,000) refundable even if you have no tax liabilityNonrefundable

Who claims these credits: students or parents?

The student or the student’s parent(s) can claim the AOTC or the LLC — whoever pays for the schooling. Students can only claim the credit if they are not considered dependents on someone else’s return.

What are qualified education expenses?

American Opportunity Credit qualified higher education expenses

  • Tuition and fees required for the student’s enrollment
  • Course materials such as books, supplies, and equipment the student needs to complete their course of study (even if not purchased from the educational institution directly)

Lifetime Learning Credit qualified higher education expenses

  • Tuition and fees required for the student’s enrollment
  • Course materials if the school requires these items for enrollment or attendance, and they are purchased from the educational institution

What college costs are NOT considered qualified education expenses?

Personal expenses are not qualified education expenses. Some examples of what the IRS considers personal expenses are room and board, insurance, medical expenses, student health fees, transportation, and other similar personal, living, or family expenses.

You can claim the following expenses only if they are part of your degree program (for the LLC) or help you obtain necessary job skills:

  • Noncredit courses
  • Courses involving sports, hobbies, or games

Tax deduction for college students

In addition to educational tax credits, the student loan deduction is a popular tax break for students who borrow money for school.

The student loan interest deduction

Students (or their parents) can typically deduct interest paid on qualifying student loans. The best part? This is an above-the-line deduction, meaning you don’t need to itemize to claim this deduction.

You can deduct up to $2,500 in interest or the amount of interest you actually paid during the tax year — whichever is less. If you paid $600 or more in student loan interest during the year, you’d receive Form 1098-E from your loan servicer, which will tell you the total amount you paid.

FAQs

Claim education tax benefits with TaxAct.

When you e-file with TaxAct®, we’ll ask you simple questions to identify which educational tax breaks you could qualify for as a student or a parent. Our tax experts will guide you through the filing process, provide you with the necessary forms, and help you maximize your tax benefits.

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.

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