Tax Breaks Students (and Parents) Can Claim for 2025

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 CreditWho 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 yearModified 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 credentialHow often can you claim it?Only available four tax years per eligible studentAvailable for an unlimited number of yearsRefundable?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

Did education credits change for 2025?

The AOTC and LLC credit amounts and eligibility rules haven’t changed — you can still claim up to $2,500 per student with the American Opportunity Credit and up to $2,000 per return with the Lifetime Learning Credit.

However, there is a new identification requirement that was included in the One Big Beautiful Bill (OBBB):

• Previously, you could claim education credits just by having a valid individual taxpayer identification number (ITIN).• Now, to claim either credit, the taxpayer must include their own valid Social Security number (SSN) on the return.• If you’re claiming the credit for a dependent student, that student’s SSN must also be included.• For the AOTC specifically, your return must also list the employer identification number (EIN) of the educational institution receiving the tuition payment.

The IRS can automatically disallow the credit if the required SSN or EIN is missing or incorrect, without initiating a full audit.

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

The IRS generally considers the internet a personal, living, or family expense, meaning internet costs are unfortunately not a qualified education expense at this time. The only exception to this rule is if your internet service is paid directly to the school or educational institution. If so, your internet costs could be considered a fee required for enrollment and covered as a qualified education expense.

Is my computer a qualified education expense?

Your computer may be considered a qualifying education expense if it’s required for your enrollment or attendance at the educational institution.

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

Yes, you can claim the American Opportunity Credit or the Lifetime Learning Credit tax benefits even if you paid for qualified expenses with student loans.

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

Yes. You can still qualify for an education tax credit if you received tax-free financial aid such as a Pell Grant or scholarship, as long as you paid for qualified expenses out of pocket. Just make sure you reduce your qualified expenses by the amount of financial aid you received.

For example, let’s say you had $10,000 in qualified education expenses but received a $5,000 Pell Grant and a $3,000 scholarship. In this case, you could claim a $2,000 American Opportunity Credit or a $400 Lifetime Learning Credit on your tax return.

Can I claim both education credits?

You cannot claim the American Opportunity Credit and the Lifetime Learning Credit on the same tax return. If you qualify for both credits, the AOTC is typically more valuable because it is partially refundable and covers more qualified expenses than the LLC.

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

Parents can take the student loan interest deduction, provided their filing status is not married filing separately. Parents must also be under the income limits. For tax year 2025, the deduction slowly phases out for MAGI between $170,000 and $200,000 for those filing a joint return and between $85,000 and $100,000 for single filers. Parents must have used the loan to pay their dependent’s education expenses.

What happened to the college tuition and fees deduction?

The tuition and fees deduction expired Dec. 31, 2020. Unfortunately, this deduction is not available to taxpayers filing their 2025 income tax returns.

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.

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