College tuition is tax-deductible, though there are some limits and requirements that you must fulfill to be eligible for it. There are different types of tax credits you can get, which vary in amounts and can even be mutually exclusive if attempted to be claimed in the same year.

In this article, we’ll first learn what the difference between a tax credit and a tax deduction is, as well as what the most notable college credits are. We’ll also explore which college expenses are tax-deductible, how you can claim tuition tax benefits on your tax return, and what mistakes to avoid while doing so.

Key Takeaways

• College tuition is tax-deductible, though there are income thresholds to receive credits, and not all expenses qualify.
• Two main tax credits for higher education are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
• Common education-related expenses that are deductible include student loan interest, education materials and qualified fees, and state income tax deductions for 529 plan contributions.
• To claim tax benefits for college on your tax return, you need Form 1089-T from the educational institution, after which you’ll complete the Form 8863 and submit it with your Form 1040 or Form 1040-SR.

Tax Credits vs. Tax Deductions: What Are the Differences?

The main difference between tax credits and tax deductions is in the way they reduce your tax liability.

A tax credit represents a dollar-for-dollar reduction in your tax liability. An education tax credit, for example, will be subtracted from the actual amount of tax that you owe at the end of the year. If you’re eligible for a $1,000 tax credit, you’ll reduce your tax bill by the entire $1,000.

On the other hand, tax deduction reduces your taxable income, which subsequently reduces your tax liability. Its value is based on your marginal tax rate. For example, if you’re in the 22% tax bracket, a tax deduction of $1,000 would reduce your tax liability by $220.

Here is a table that outlines the key differences between tax credits and tax deductions:

In general, this makes tuition tax credits much more valuable than tax deductions. The good news is that the IRS offers two types of tax credits for higher education and qualified college expenses:

1. The American Opportunity Tax Credit (AOTC)
2. The Lifetime Learning Credit (LLC)

The American Opportunity Tax Credit and Lifetime Learning Credit

You can get a tuition deduction from the IRS in two different ways: the American Opportunity Tax Credit and the Lifetime Learning Credit. Let’s find out more about each of them.

American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit (AOTC) can be up to $2,500 per student for their first four years of college.

This figure is calculated in two steps:

• 100% of the first $2,000 in qualified education expenses.
• 25% of the second $2,000 in qualified education expenses.

This amounts to $2,500 total, which can be claimed in full if your income doesn’t exceed $80,000 as a single taxpayer or $160,000 as a married filing jointly. You can claim this credit even at higher income levels, but the amount gets phased out.

You can’t claim the credit if your modified adjusted gross income (MAGI) is over $90,000 as a single filer or $180,000 for joint filers.

Additionally, if the AOTC reduces your tax liability to zero, you may be eligible for a refund. This tax refund is 40% of the remaining amount of the credit, which can be a maximum of $1,000.

To qualify for the AOTC, the student must be:

• Pursuing a degree or a recognized credential
• Enrolled for at least half-time and for at least one academic period
• Not finished with the first four years of higher education
• Not have a felony drug conviction

Lastly, the American Opportunity Tax Credit can be claimed for as many students as you have in your household. For example, if you have two children who are both in college, still in their first four years, and they meet the rest of the criteria, you potentially qualify for up to $5,000 in the American Opportunity Tax Credit.

Lifetime Learning Credit (LLC)

The Lifetime Learning Credit (LLC) can be up to $2,000 per tax return, regardless of the number of students in your household. It is calculated as 20% of the first $10,000 in qualified education expenses.

Unlike AOTC, which is only available for students for their first four years of college, LLC is available for an unlimited number of years and for almost any degree or course.

Income limits for LLC are the same as they are for AOTC. In 2024, they were $80,000 for single taxpayers and $160,000 for married filing a joint return. Above this income, the credit gets phased out, up to the taxpayer’s MAGI figure of $90,000 for single filers and $180,000 for married filing jointly. Beyond that, you become ineligible for this tax credit.

Other qualifications that students need to fulfill to be eligible for LLC include:

• Taking courses at an eligible institution. This includes studying for a degree, a recognized credential, and even getting or improving job skills
• Being enrolled in at least one academic period that begins in the tax year

Another difference compared to AOTC is that LLC is nonrefundable. This means that even if it reduces your tax liability to zero, you won’t be able to receive a refund.

Lastly, it’s important to note that a taxpayer can’t claim both AOTC and LLC for the same student in the same tax year.

Which College Expenses Are Tax-Deductible?

While there is no general college tuition tax deduction, there are various college expenses that you can leverage for tax benefits. Understanding which expenses qualify can help you claim appropriate credits and maximize your savings.

It’s also important to keep detailed records of your purchases and spending related to education, so that you can provide evidence when claiming these benefits on your tax return.

#1. Student Loan Interest

Student loan interest is one of the most important tax-deductible college expenses. It represents interest you paid on a qualified student loan and encompasses both mandatory and voluntary interest payments.

You may deduct up to $2,500 of interest you paid during the year. This amount depends on your modified adjusted gross income (MAGI) and filing status.

The full amount is valid if your MAGI is up to $165,000 per year for married filing jointly, or $80,000 for single filers. This deduction gets phased out as your MAGI grows, up to $195,000 for married filing jointly or $95,000 for single filers. If your income is above that, you can’t claim this deduction.

#2. Education Materials and Qualified Fees

Various fees and materials relevant to your education can be used to claim both the AOTC and LLC. This includes fees required to enroll in a college, attend classes, buy books and supplies, and so on.

For the AOTC, books, supplies, and other course materials don’t even have to be purchased from the school that you’re attending. The situation is different for the LLC, where your expenses must be relevant to your institution.

Some expenses that are not considered qualified include transportation costs, insurance, medical expenses, and room and board expenses.

#3. State Income Tax Deductions for 529 Plan Contributions

A 529 plan is a tax-advantaged savings plan designed to help you pay for qualified education expenses, like college or trade school. While there are no federal tax deductions relevant to contributions to this plan, many states offer deductions or credits.

Annual tax savings you can achieve vary significantly by state. For example, states like Alaska, California, Washington, and Wyoming offer no deductions; Alabama offers $5,000 for individual filers and $10,000 for married filing jointly; Arizona offers $2,000 and $4,000, respectively, per beneficiary; New Mexico offers 100% of contributions.

On the other hand, states like Utah offer a tax credit, which, in 2025, was $113.30 for single filers and $226.59 for married filing jointly per beneficiary.

How to Claim Tuition Tax Benefits on Your Return

To claim tax tuition benefits on your return, you need to use the appropriate IRS forms.

The first step involves receiving an essential document from your domestic or foreign educational institution: Form 1098-T, Tuition Statement. In most cases, institutions are obligated to send this Form by January 31st for each student who paid for tuition or relevant educational expenses in a previous tax year.

Box 1 in the Form will detail how much you paid for qualified tuition and expenses, but this might not be the exact amount that you can use to apply for a deduction. Instead, you need to check out Publication 970 to determine what amount you can claim.

Once you have determined the correct amount, you need to complete the Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), and attach it to your Form 1040 or Form 1040-SR.

In some instances, you may not need Form 1098-T to claim a credit and deduct college tuition. This includes the following situations:

• A student is a qualified nonresident alien.
• All qualified expenses have been paid with scholarships.
• All qualified expenses have been paid under a formal billing arrangement.
• Courses award no academic credit.

Note that you’ll have to keep all the documents you used to determine your eligibility for a tax credit and to claim it. The IRS can audit and penalize you in case you made a fraudulent claim or don’t have the audit documentation to show as proof, especially for AOTC.

You may be required to pay the amount back with interest and penalties, and you can be banned from applying for a student tax credit for 2–10 years.

Common Mistakes to Avoid

Let’s take a look at the three biggest and most common mistakes you should avoid when looking for tax savings for students:

• Claim the wrong credit or both credits. It’s common to try to claim both LLC and AOTC for the same student in the same tax year, which is not allowed. Instead, you should opt for the credit that gives you the most benefit. In general, AOTC is more valuable to students in their first four years due to its higher value and refundability.

• Reporting wrong expenses or doing so incorrectly. It’s essential to look into qualified tuition fees for a tax write-off, as not everything is eligible for a credit. Expenses like room and board, transportation, and medical fees aren’t qualified for either AOTC or LLC.

• Making dependency-related errors. If a student is claimed as a dependent, only their parents can claim the tax credit on their tax return. It’s also the parents’ income that’s used when determining the threshold, even if the student paid for the college expenses. Only if the student isn’t claimed as a dependent can they claim the credit for themselves.

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Final Thoughts

College tuition is tax-deductible, as long as you fulfill the necessary criteria and claim the correct credit in the right way. To achieve that, you need to know which expenses qualify and what documents you need. Following that, it’s important to avoid making mistakes, such as trying to claim both LLC and AOTC for the same student in the same year.

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Is College Tuition Tax Deductible FAQ

#1. Is paying someone else’s tuition tax-deductible?

Paying for someone else’s tuition usually isn’t tax-deductible. You can claim tax benefits for yourself, your spouse, or your dependents. Paying someone else’s tuition is typically classified as a gift, which does not make you eligible for a deduction or credit.

#2. What college expenses are tax-deductible for parents?

College expenses aren’t directly tax-deductible for parents. Instead, they can claim their child as a dependent, which can make them eligible for the American Opportunity Tax Credit and the Lifetime Learning Credit for qualified expenses that they paid.

#3. Are school supplies tax-deductible for college students?

School supplies can be tax-deductible for college students. For the American Opportunity Tax Credit, supplies like books and necessary equipment are considered qualified expenses even if they aren’t purchased from the school. For the Lifetime Learning Credit, the supplies must be purchased from the school to qualify for the deduction.