Claiming Qualified Education Expenses

This article updated from its original posting of 8/1/202

It’s that time of year again when colleges and students are preparing for the start of a new academic year and the costs associated with it. 

The IRS offers a few tax benefits for qualified education expenses as follows:

  1. The American Opportunity Credit
  2. The Lifetime Learning Credit
  3. Tuition and Fees Deduction

All three are based on qualified education expenses paid, which include tuition, fees, and other related expenses for an eligible student that are required for enrollment or attendance at an eligible educational institution.  Eligible expenses also include student activity fees you are required to pay to enroll or attend the school.  

The expenses must be for higher education that results in a degree or other recognized education credential.  For the American Opportunity Credit only – expenses for books, supplies, and equipment the student needs for a course of study are included qualified education expenses even if it is not paid to the school.  For the Lifetime Learning Credit only – you can qualify if you take the course to acquire or improve your job skills. 

Expenses for sports, games, hobbies, or non-credit courses do not qualify for the education credits or tuition and fees deduction, except when the course or activity is part of the student’s degree program.

In addition, you must pay the expenses for an academic period that starts during the tax year or the first three months of the next tax year, but you cannot claim a credit for education expenses paid with tax-free funds. You must reduce the number of expenses paid with tax-free grants, scholarships and fellowships, and other tax-free education help.

Lastly, the following expenses do not qualify:

  1. Room and Board
  2. Insurance
  3. Medical expenses (including student health fees)
  4. Transportation
  5. Similar personal, living, or family expenses

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