Education Benefits -- No Double Benefits Allowed
You can’t take more than one education benefit for the same student and the same expenses. This means that you can't take both the American Opportunity Tax Credit and the Lifetime Learning Credit for the same student in the same tax year. Additionally, if you receive tax-free educational assistance, such as a grant, you need to subtract that amount from your qualified education expenses.
Adjustments to Qualified Education Expenses
When it comes to adjusting educational expenses, here is a broad overview of the process. For more detailed information, we recommend consulting Publication 970, Tax Benefits for Education.
For each student, follow these steps:
- Take the total amount of qualified education expenses paid for the student.
- Subtract the amount of tax-free educational assistance the student received.
- Use any remaining qualified education expenses to claim an education credit.
Examples of tax-free educational assistance include:
- Tax-free parts of scholarships and fellowships
- Pell grants and other need-based education grants
- Employer-provided educational assistance
- Veterans' educational assistance
- Any other tax-free payments (other than gifts or inheritances) received as educational assistance
What Funds Do Not Reduce My Qualified Education Expenses?
You don’t need to reduce your qualified education expenses by amounts paid with the following:
- Payments for services, such as wages
- Money from loans
- Gifts
- Inheritances
- Student's personal savings
- Scholarships or fellowships reported as income on the student's tax return when:
- The terms of the scholarship or fellowship restrict the use of the money to costs of attendance that are not for qualified education expenses (such as room and board)
- The use of the money is not restricted and may be used for qualified expenses or not qualified expenses
Finding the Best Education Benefit for You
We want you to take the education benefit that helps you the most. Generally, a credit that reduces your tax or increases your refund is the best option. Look at all your options and see what helps you the most.
You can also consider including a tax-free scholarship, fellowship, or grant in your student’s income and then taking the full amount of the education credit. For more information, refer to Publication 970, Tax Benefits for Education.
Use the "Am I Eligible to Claim an Education Credit?" tool to help you find out if you can claim an education credit.
Refund of Qualified Education Expenses
If you receive a refund of qualified education expenses during the tax year, refer to Publication 970, Tax Benefits for Education, for information on what to do.
Common Errors Made When Claiming Education Credits
Here are some common errors to avoid when claiming education credits:
- Listing students as dependents or spouses on another tax return
- Students who don’t have a Form 1098-T
- Students who are not paying qualified education expenses
More Answers to Questions
For more answers to questions about education credits, see the "Education Credits: Questions and Answers" section.
More Resources
Here are some additional resources related to education benefits:
- American Opportunity Tax Credit
- Lifetime Learning Credit
- Compare Education Credits
- Interactive App - "Am I Eligible to Claim an Education Credit?"
- Qualified Education Expense
- Eligible Educational Institution
- Tax Benefits for Education: Information Center
- Tax Preparer Toolkit
- What You Need to Know about AOTC and LLC
- Refundable Credits Toolkit
Forms and Publications
Here are some relevant forms and publications:
- Publication 970, Tax Benefits for Education
- Form 8863, Education Credit
- Form 8863 Instructions
- Form 1098-T
- Form 1098-E and T Instruction