Can I Deduct School Expenses on My Taxes?
Learn which education expenses may be tax-deductible, what costs don’t qualify, and the key factors that determine eligibility for potential savings.
Education costs add up quickly, leading many to wonder if tax deductions can help. While some expenses qualify, others do not, making it important to understand what applies to your situation.
Before assuming tuition, books, or supplies are deductible, it’s essential to know which costs are eligible and what requirements must be met.
Expenses That May Be Deductible
Some education-related expenses can reduce taxable income, but eligibility depends on IRS guidelines. The Student Loan Interest Deduction allows borrowers to deduct up to $2,500 in interest paid on qualified student loans. This deduction applies even if you don’t itemize, though income limits apply, with phaseouts beginning at $75,000 for single filers and $155,000 for married couples filing jointly in 2024.
The Lifetime Learning Credit (LLC) provides a 20% credit on the first $10,000 of qualified education expenses, up to a maximum of $2,000 per tax return. Unlike other education credits, the LLC applies to undergraduate, graduate, and professional development courses but is non-refundable, meaning it reduces taxes owed but won’t generate a refund. The income phaseout starts at $80,000 for single filers and $160,000 for joint filers in 2024.
The American Opportunity Tax Credit (AOTC) offers up to $2,500 per eligible student, covering 100% of the first $2,000 in qualified expenses and 25% of the next $2,000. Unlike the LLC, up to $1,000 of this credit is refundable. However, the AOTC is only available for the first four years of postsecondary education. Income limits apply, with phaseouts beginning at $80,000 for single filers and $160,000 for joint filers.
Costs That Typically Do Not Qualify
Many education expenses do not qualify for tax benefits. Room and board, transportation, and meal plans are considered living expenses, not direct educational costs, even if a student is required to live on campus.
School supplies must be explicitly required for coursework to qualify. Items like backpacks, general stationery, or personal laptops are not deductible unless mandated by the school or a specific class.
Extracurricular activities and non-credit courses generally do not qualify. Fees for sports programs, student clubs, or recreational classes are ineligible, even if offered by an accredited institution. Professional development workshops or training programs that do not lead to a recognized degree or certification also do not meet IRS criteria.
Eligibility Factors You Should Know
To qualify for education-related tax benefits, the institution must be an eligible educational institution, which includes accredited colleges, universities, and vocational schools that participate in federal student aid programs. Schools not recognized by the U.S. Department of Education do not qualify.
How an expense is paid also affects eligibility. If an employer reimburses tuition through a qualified educational assistance program, up to $5,250 of that assistance is tax-free. Any amount beyond that is considered taxable income. Education expenses covered by tax-free scholarships, grants, or fellowships cannot be claimed for credits or deductions. For example, if a student receives a $4,000 Pell Grant that fully covers tuition, they cannot also claim that tuition expense for a tax credit.
Filing status and income level also impact eligibility. Many education-related deductions and credits are unavailable to married couples filing separately. Taxpayers classified as dependents on someone else’s return may also be restricted from claiming certain benefits. Adjusted gross income (AGI) plays a role, as phaseouts apply to most education tax credits, reducing or eliminating eligibility for higher earners.
Key Documentation and Forms
Maintaining thorough records is essential when claiming education-related tax benefits. One of the most important documents is Form 1098-T, Tuition Statement, which eligible educational institutions provide to students who have paid qualified tuition and related expenses. This form includes the total amounts billed or paid for tuition and fees, as well as any scholarships or grants received. Ensuring that the amounts reported on Form 1098-T align with personal records is important, as discrepancies can lead to processing delays or audits.
Beyond the 1098-T, taxpayers should retain receipts, billing statements, and bank records detailing payments made for educational expenses. If claiming deductions for required course materials not reflected on the tuition statement, maintaining proof of purchase—such as itemized receipts from university bookstores or online retailers—can help substantiate claims. For those deducting student loan interest, Form 1098-E, Student Loan Interest Statement, issued by lenders, is needed to report the amount of interest paid throughout the year.