Qualified education expenses are costs paid for an eligible student to enroll or attend an eligible educational institution. These include:
- Tuition and mandatory enrollment fees
- Student activity fees required for enrollment
- Books, supplies, and equipment required for coursework
- For the American Opportunity Tax Credit (AOTC): These qualify even if purchased off‑campus.
- For the Lifetime Learning Credit (LLC): These qualify only if the school requires you to pay them directly.
Academic periods covered include semesters, trimesters, quarters, or any school‑defined period beginning in the tax year or within the first three months of the next year.
Expenses That Do Not Qualify
The following costs do not count as qualified education expenses, even if paid to the school:
- Room and board
- Insurance
- Medical expenses (including student health fees)
- Transportation
- Personal or living expenses
- Sports, games, hobbies, or non‑credit courses (unless part of a degree program for AOTC or job‑skill improvement for LLC)
How Payments Must Be Made
You can claim education credits if qualified expenses are paid by:
- You or your spouse
- A dependent you claim
- A third party (including relatives or friends)
Payments may be made by cash, check, credit/debit card, or loan funds. If paid with a loan, the credit applies in the year the expenses are paid—not when the loan is received or repaid.
Education Tax Credits in 2026
1. American Opportunity Tax Credit (AOTC)
- Up to $2,500 per eligible student
- Available for the first four years of higher education
- Must be pursuing a degree or recognized credential
- Partially refundable—up to $1,000 back even if you owe no tax
2. Lifetime Learning Credit (LLC)
- Up to $2,000 per tax return
- Available for all years of postsecondary education
- Covers courses to acquire or improve job skills
- No limit on the number of years you can claim it
To claim either credit, taxpayers must file Form 8863 with their federal tax return.
Additional Education‑Related Tax Benefits
IRS Publication 970 also outlines other benefits, including:
- Student loan interest deductions (up to $2,500)
- Business deductions for work‑related education
- Various other education‑related tax provisions for students and families
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.