You can’t take more than one education benefit for the same student and the same expenses. So, you can't take the American opportunity tax credit and lifetime learning credit for the same student in the same tax year. Also, 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 This brief description of adjusting educational expenses is a broad overview. If you or your student fall under any of the listed categories, we suggest you consult Publication 970, Tax Benefits for Education PDF, for more information Generally, for each student: 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. Look at all your options and see what helps you the most. Also, you can consider including a tax-free scholarship, fellowship or grant to your student’s income and then taking the full amount of the education credit. Refer to Publication 970,Tax Benefits for Education PDF, for more information. Use Am I Eligible to Claim an Education Credit? to help you find out if you can claim an education credit. Refund of qualified education expenses See Publication 970,Tax Benefits for Education PDF, for information on what to do if you receive a refund of qualified education expenses during the tax year. Common errors made when claiming education credits Students listed as a dependent or spouse on another tax return Students who don’t have a Form 1098-T Students who are not paying qualified education expenses Find more answers to questions See Education Credits: Questions and Answers More resources 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 Publication 970, Tax Benefits for Education PDF Form 8863, Education Credit PDF Form 8863 Instructions PDF Form 1098-T PDF Form 1098-E and T Instruction PDF
