Is College Tuition Tax Deductible? | Let's Take A Look

April, 11 2025 by Brittney D. Williams, EA 

Although the cost of higher education in the United States has recently dropped, pursuing a college degree is still rather expensive. According to the article “What You Need to Know About College Tuition Costs,” published by U.S. News & World Report, for the 2024-2025 school year, the average tuition bill for in-state students to attend a public college or university in the United States is $11,011, while the average in-state tuition at a private institution is $43,505.¹ Out-of-state students pay a higher tuition bill for a public institution, averaging $24,513. Tuition isn’t the only cost associated with pursuing a college degree. Additional common costs are room and board, meals, books, supplies, and other fees, which can add thousands of dollars to the yearly bill.

Many individuals and families are left with the question of how they will pay for college for themselves or their children. Many students aren’t fortunate enough to win scholarships or be awarded grants to pay for college. Thankfully, the Tax Code offers two tax credits for college tuition paid during the taxable year. Each credit has different requirements that must be met, which will determine the benefit an individual is eligible for. The two credits available are the American Opportunity Tax Credit and the Lifetime Learning Credit.
 

General Requirements for claiming education credits

There are specific requirements for claiming each of the education credits; however, the following rules must be met for both:

• The taxpayer, dependent, or a third party pays qualifying education expenses for higher education. Third-party payments can be made by a relative, such as a grandparent, by a lender, or by a credit card. These payments are treated as being made by the taxpayer.
• The expenses paid are for an eligible student enrolled at an eligible educational institution.
• The eligible student must be the taxpayer, the taxpayer’s spouse, or a dependent listed on the tax return.

Education credits cannot be claimed under the following circumstances: 

• The student is claimed as a dependent on someone else’s tax return.
• The filing status on the tax return is Married Filing Separately.
• Using the same education expenses to claim another credit or deduction - no double-dipping.
• The taxpayer or spouse was a nonresident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes.

American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit is available for a student’s first four years of higher education. The maximum amount of credit per eligible student is $2,500 per year. The AOTC may be partially refundable if the credit reduces the amount of tax owed to zero. Up to 40 percent of the credit remaining after the tax has been reduced to zero can be refunded, which increases any refund due to the taxpayer.

A student must meet the following requirements to claim the American Opportunity Tax Credit:

• The student must be the taxpayer, spouse, or eligible dependent claimed by the taxpayer;
• The student must be enrolled at least half-time for at least one academic period at a qualifying institution;
• The student must be pursuing a degree, certificate, or other recognized education credential;
• The student has not finished the first four years of higher education at the beginning of the tax year;
• The student has not claimed the American Opportunity Tax Credit or the former Hope Credit for more than four tax years; and
• The student has not had a felony drug conviction at the end of the tax year.

Lifetime Learning Credit

In contrast to the AOTC, the Lifetime Learning Credit (LLC) extends beyond the first four years of higher education. This credit is for undergraduate, graduate, and professional degree courses, as well as courses to acquire or improve job skills. The credit is a maximum of $2,000 per tax return. It is 20 percent of the first $10,000 of qualified education expenses. This is a nonrefundable credit. Therefore, if there is any credit remaining after the tax is reduced to zero, the remaining credit is lost. It cannot be refunded or carried forward to future tax years.

A student must meet the following requirements to claim the LLC:

• The student must be enrolled in or taking courses at an eligible educational institution;
• The student must be taking courses leading to a degree or other recognized credential, or courses to acquire or improve job skills.
• The student must be enrolled for at least one academic period beginning in the tax year. The school determines what an academic period is, which could be a semester, trimester, quarter, etc. If the educational institution does not have an academic period, then payment periods may be considered the academic period.

Income Limits

There are income limits when claiming either of the education credits. Modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for Married Filing Jointly) to claim the full amount of the credit. The credit is gradually reduced if MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for Married Filing Jointly). If MAGI is greater than $90,000 ($180,000 if Married Filing Jointly), the credit is phased out completely.
 

What expenses qualify?

Qualified expenses for claiming both education credits include tuition and related expenses, as well as fees necessary to enroll in and attend a qualified educational institution. For the AOTC only, this includes amounts paid for books, supplies, and equipment needed for coursework whether they are purchased from the educational institution or elsewhere. When it comes to the LLC, student activity fees and course-related books, supplies, and equipment are only includable in determining the amount of the credit if they are purchased at the institution and are required to take the course.

There are many expenses that are common for college students that are not qualifying expenses for the purpose of claiming an education credit. Expenses such as room and board, transportation, insurance, and medical expenses are not allowable. Expenses paid with tax-free educational assistance, such as grants and scholarships, are not allowable.

Earning a college degree is an accomplishment many aspire to. The cost of attending college has made this goal more difficult for some families. Thankfully, the American Opportunity Tax Credit and Lifetime Learning Credit are available to ease some of the financial burden. For more information about education credits, you may refer to IRS Publication 970.

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¹ Sarah Wood, “What You Need to Know About College Tuition Costs,” U.S. News & World Report, September 25, 2024