Higher education and career development can be valuable investments, but the costs can add up quickly. The good news is that taxpayers may be able to reduce some of those expenses through education-related tax credits and deductions.
If you paid qualified education expenses for yourself, your spouse, or a dependent, you may be eligible for valuable tax benefits when filing your federal return.
Two of the most common tax benefits for education expenses are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
Taxpayers may qualify for one of these credits, but not both in the same year for the same student. To claim either credit, Form 8863, Education Credits, must be filed with the federal tax return.
To qualify for either credit:
The American Opportunity Tax Credit may provide a benefit of up to $2,500 per eligible student.
This credit is available only for the first four years of higher education at an eligible college, university, or vocational school. It applies to students who are pursuing a degree or another recognized educational credential.
One important advantage of the AOTC is that it is partially refundable, meaning eligible taxpayers could receive up to $1,000 back even if they owe little or no tax.
The Lifetime Learning Credit offers a maximum benefit of up to $2,000 per tax return, per year.
Unlike the AOTC, the LLC is not limited to a student’s first four years of education. It can be used for all years of postsecondary education and for courses taken to acquire or improve job skills. It is also available for an unlimited number of tax years, which can make it especially useful for graduate students, part-time students, and working professionals continuing their education.
In addition to credits, some taxpayers may also qualify for deductions tied to education expenses. While credits reduce taxes dollar-for-dollar, deductions lower taxable income, which can also reduce an overall tax bill.
Taxpayers who paid interest on a qualified student loan may be able to deduct up to $2,500 of student loan interest paid during the year.
This deduction is subject to income limits. For 2026, the deduction phases out for taxpayers with modified adjusted gross income between $85,000 and $100,000, or between $170,000 and $200,000 for those filing jointly.
Certain taxpayers may also be able to deduct qualifying education costs as business expenses. This may apply to:
In addition, individuals with disabilities may be able to deduct impairment-related expenses connected to work-related education as an itemized deduction.
Education expenses can be significant, but available tax credits and deductions may help ease the financial burden. Whether you are paying for college, taking professional development courses, or repaying student loans, it is important to understand which tax benefits may apply to your situation.
A careful review of eligibility requirements can help ensure you receive the maximum benefit available.
Get in touch today and find out how we can help you meet your objectives.
