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Future Developments

Publication 970

Tax Benefits

for Education

For use in preparing

2025 Returns

For the latest information about developments related to

Pub. 970, such as legislation enacted after it was

published, go to IRS.gov/Pub970.

What’s New for Tax Year 2025

Trump accounts and new Form 4547. Recent legislation allows parents, guardians, and other authorized individuals to elect to establish a new type of individual retirement account, called a Trump account, for the exclusive

benefit of certain children. If the child was born after 2024

and before 2029, is a U.S. citizen, and meets certain other

requirements, the authorized individual may also elect to

receive a $1,000 pilot program contribution to the child’s

Trump account. Both elections can be made on Form

4547, which can be filed at the same time as the authorized individual’s 2025 income tax return. For more information on Trump accounts, and to learn how to make

these elections, see Form 4547 and its instructions.

Student loan interest deduction. For 2025, the amount

of your student loan interest deduction is gradually reduced (phased out) if your MAGI is between $85,000 and

$100,000 ($170,000 and $200,000 if you file a joint return). You can’t claim the deduction if your MAGI is

$100,000 or more ($200,000 or more if you file a joint return). See chapter 4.

Education savings bond program. For 2025, the

amount of your education savings bond interest exclusion

is gradually reduced (phased out) if your MAGI is between

$99,500 and $114,500 ($149,250 and $179,250 if you file

a joint return). You can’t exclude any of the interest if your

MAGI is $114,500 or more ($179,250 or more if you file a

joint return). See chapter 9.

Business deduction for work-related education. Generally, if you claim a business deduction for work-related

education and you drive your car to and from school, the

amount you can deduct for miles driven from January 1,

2025, through December 31, 2025, is 70 cents a mile. See

chapter 11.

What’s New for Tax Year 2026

Get forms and other information faster and easier at:

• IRS.gov (English)

• IRS.gov/Spanish (Español)

• IRS.gov/Chinese (中文)

Jan 27, 2026

Identification requirement. Beginning in 2026, individuals claiming the American opportunity credit or the lifetime

learning credit will be required to have a Social Security

Number (SSN) that is valid for work and that was issued

before the due date of the return. In cases where the individual claiming the credit is not the student for whom the

tuition and related expenses were paid, the student will

also need a valid SSN in order to qualify for the credit.

• IRS.gov/Korean (한국어)

• IRS.gov/Russian (Pусский)

• IRS.gov/Vietnamese (Tiếng Việt)

Publication 970 (2025) Catalog Number 25221V

Department of the Treasury Internal Revenue Service www.irs.gov

Reminders

Form 1098-T, Tuition Statement. When figuring an education credit, use only the amounts you paid and are

deemed to have paid during the tax year for qualified education expenses. In most cases, the student should receive Form 1098-T from the eligible educational institution

by February 2, 2026 (January 31 falls on a Saturday).

However, the amount on Form 1098-T might be different

from the amount you actually paid and are deemed to

have paid. In addition, Form 1098-T should give you other

information for that institution, such as adjustments made

for prior years; the amount of scholarships or grants, reimbursements, or refunds; and whether the student was enrolled at least half-time or was a graduate student. The eligible educational institution may ask for a completed Form

W-9S, Request for Student’s or Borrower’s Taxpayer Identification Number and Certification, or similar statement to

obtain the student’s name, address, and taxpayer identification number.

Form 1098-T requirement. To be eligible to claim the

American opportunity credit or lifetime learning credit, the

law requires a taxpayer (or a dependent) to have received

Form 1098-T from an eligible educational institution,

whether domestic or foreign.

However, you may claim a credit if the student doesn’t

receive a Form 1098-T because the student’s educational

institution isn’t required to furnish a Form 1098-T to the

student under existing rules (for example, if the student is

a qualified nonresident alien, has qualified education expenses paid entirely with scholarships, has qualified education expenses paid under a formal billing arrangement,

or is enrolled in courses for which no academic credit is

awarded). If a student’s educational institution isn’t required to provide Form 1098-T to the student, you may

claim a credit without Form 1098-T if you otherwise qualify, can demonstrate that you (or a dependent) were enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and related expenses.

You may also claim a credit if the student attended an

eligible educational institution required to furnish Form

1098-T but the student doesn’t receive Form 1098-T before you file your tax return (for example, if the institution is

otherwise required to furnish Form 1098-T and doesn’t

furnish it or refuses to do so) and you take the following required steps: After February 2, 2026 (January 31 falls on a

Saturday), but before you file your 2025 tax return, you or

the student must request that the educational institution

furnish Form 1098-T. You must fully cooperate with the educational institution’s efforts to gather the information needed to furnish Form 1098-T. You must also otherwise qualify for the benefit, be able to demonstrate that you (or a

dependent) were enrolled at an eligible educational institution, and substantiate the payment of qualified tuition

and related expenses.

Educational institution’s EIN required. To claim the

American opportunity credit, you must provide the educational institution’s employer identification number (EIN) on

your Form 8863. You should be able to obtain this

information from Form 1098-T or the educational institution. See chapter 2.

Form 8862 may be required. If your American opportunity credit was denied or reduced for any reason other

than a math or clerical error for any tax year beginning after 2015, you must attach a completed Form 8862, Information To Claim Certain Credits After Disallowance, to

your tax return for the next year for which you claim the

credit. See chapter 2.

Ban on claiming the American opportunity credit. If

you claim the American opportunity credit even though

you’re not eligible, you may be banned from claiming the

credit for 2 or 10 years depending on your conduct. See

chapter 2.

Taxpayer identification number (TIN) needed by due

date of return. If you haven’t been issued a TIN by the

due date of your 2025 return (including extensions), you

can’t claim the American opportunity credit on either your

original or an amended 2025 return. Also, the American

opportunity credit isn’t allowed on either your original or an

amended 2025 return for a student who hasn’t been issued a TIN by the due date of your return (including extensions). See chapter 2.

Higher education emergency grants. Emergency financial aid grants under the following are not included in

your gross income.

• The CARES Act.

• The Coronavirus Response and Relief Supplemental

Appropriations Act, 2021.

• The American Rescue Plan Act of 2021.

Also, for purposes of the American opportunity tax

credit (see chapter 2) and lifetime learning credit (see

chapter 3), a student does not reduce an amount of qualified tuition and related expenses by the amount of an

emergency financial aid grant. For more information, go to

Higher Education Emergency Grants Frequently Asked

Questions.

Coordination with Pell grants and other scholarships

or fellowship grants. It may benefit you to choose to include otherwise tax-free scholarships or fellowship grants

in income. This may increase your education credit and

lower your total tax or increase your refund. See Coordination with Pell grants and other scholarships in chapter 2

and chapter 3.

Student loan interest deduction. You can’t deduct as

interest on a student loan any interest paid by your employer after March 27, 2020, under an educational assistance program. See chapter 4.

Student loan forgiveness. The American Rescue Plan

Act of 2021 modified the treatment of student loan forgiveness for discharges in 2021 through 2025. See chapter 5.

Achieving a Better Life Experience (ABLE) account.

This is a savings account for individuals with disabilities

and their families. Distributions are tax free if used to pay

the beneficiary’s qualified disability expenses, which may

include education expenses. For more information, see

Pub. 907, Tax Highlights for Persons With Disabilities.

Publication 970 (2025)

Estimated tax payments. If you have taxable income

from any of your education benefits and the payer doesn’t

withhold enough income tax, you may need to make estimated tax payments. For more information, see Pub. 505,

Tax Withholding and Estimated Tax.

Employer-provided educational assistance benefits.

Employer-provided educational assistance benefits include payments made after March 27, 2020, for principal

or interest on any qualified education loan you incurred for

your education. See chapter 10.

Miscellaneous itemized deductions. For tax years beginning after 2017, you no longer deduct work-related education expenses as a miscellaneous itemized deduction

subject to a 2%-of-adjusted-gross-income floor. See

chapter 11.

Photographs of missing children. The IRS is a proud

partner with the National Center for Missing & Exploited

Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring

these children home by looking at the photographs and

calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication explains tax benefits that may be available to you if you are saving for or paying education costs

for yourself or, in many cases, another student who is a

member of your immediate family. Most benefits apply

only to higher education.

What is in this publication. Chapter 1 explains the tax

treatment of various types of educational assistance, including scholarships, fellowship grants, and tuition reductions.

Two tax credits for which you may be eligible are explained in chapter 2 and chapter 3. These benefits, which

reduce the amount of income tax you may have to pay,

are:

• The American opportunity credit, and

• The lifetime learning credit.

Nine other types of benefits are explained in chapters 4

through 11. These benefits, which reduce the amount of

income tax you may have to pay, are:

• Deduct student loan interest;

• Receive tax-free treatment of a canceled student loan;

• Receive tax-free student loan repayment assistance;

• Establish and contribute to a Coverdell education savings account (ESA), which features tax-free earnings;

• Participate in a qualified tuition program (QTP), which

features tax-free earnings;

• Take early distributions from any type of individual retirement arrangement (IRA) for education costs without paying the 10% additional tax on early

distributions;

Publication 970 (2025)

• Cash in savings bonds for education costs without

having to pay tax on the interest;

• Receive tax-free education benefits from your employer; and

• Claim a business deduction for work-related education.

Note: You generally can’t claim more than one of the

benefits described in the list above for the same qualifying

education expense.

Comparison table. Some of the features of these

benefits are highlighted in the Appendix, later in this publication. This general comparison table may guide you in

determining which benefits you may be eligible for and

which chapters you may want to read.

When you figure your taxes, you may want to

TIP compare these tax benefits so you can choose

the method(s) that give(s) you the lowest tax liability. If you qualify, you may find that a combination of

credit(s) and deduction(s) gives you the lowest tax.

Analyzing your tax withholding. After you estimate

your education tax benefits for the year, you may be able

to reduce the amount of your federal income tax withholding. Also, you may want to recheck your withholding during the year if your personal or financial situation changes.

For more information, see Pub. 505.

Glossary. In this publication, wherever appropriate, we

have tried to use the same or similar terminology when referring to the basic components of each education benefit.

Some of the terms used are:

• Qualified education expenses,

• Eligible educational institution, and

• Modified adjusted gross income (MAGI).

Even though the same term, such as “qualified education expenses,” is used to label a basic component of

many of the education benefits, the same expenses aren’t

necessarily allowed for each benefit. For example, the

cost of room and board is a qualified education expense

for the QTP, but not for the education savings bond program.

Many of the terms used in the publication are defined in

the glossary near the end of the publication. The glossary

isn’t intended to be a substitute for reading the chapter on

a particular education benefit, but it will give you an overview of how certain terms are used in discussing the different benefits.

Comments and suggestions. We welcome your comments about this publication and suggestions for future

editions.

You can send us comments through IRS.gov/

FormComments. Or, you can write to the Internal Revenue

Service, Tax Forms and Publications, 1111 Constitution

Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will

consider your comments and suggestions as we revise

our tax forms, instructions, and publications. Don’t send

tax questions, tax returns, or payments to the above address.

Getting answers to your tax questions. If you have

a tax question not answered by this publication or the How

To Get Tax Help section at the end of this publication, go

to the IRS Interactive Tax Assistant page at IRS.gov/

Help/ITA where you can find topics by using the search

feature or viewing the categories listed.

Scholarships, Fellowship

Grants, Grants, and

Tuition Reductions

Getting tax forms, instructions, and publications.

Go to IRS.gov/Forms to download current and prior-year

forms, instructions, and publications.

Reminders

Ordering tax forms, instructions, and publications.

Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order

prior-year forms and instructions. The IRS will process

your order for forms and publications as soon as possible.

Don’t resubmit requests you’ve already sent us. You can

get forms and publications faster online.

Useful Items

You may want to see:

Publication

463 Travel, Gift, and Car Expenses

463

525 Taxable and Nontaxable Income

525

550 Investment Income and Expenses

550

590-A Contributions to Individual Retirement

Arrangements

590-A

590-B Distributions from Individual Retirement

Arrangements

590-B

Form (and Instructions)

1040 U.S. Individual Income Tax Return

1040

1040-NR U.S. Nonresident Alien Income Tax Return

1040-NR

1040-SR U.S. Income Tax Return for Seniors

1040-SR

2106 Employee Business Expenses

2106

5329 Additional Taxes on Qualified Plans and Other

Tax-Favored Accounts

5329

8815 Exclusion of Interest From Series EE and I U.S.

Savings Bonds Issued After 1989

Individual retirement arrangements (IRAs). You can

set up and make contributions to an IRA if you receive taxable compensation. A scholarship or fellowship grant is

generally taxable compensation only if it is shown in box 1

of your Form W-2, Wage and Tax Statement. However, for

tax years beginning after 2019, certain non-tuition fellowship and stipend payments not reported to you on Form

W-2 are treated as taxable compensation for IRA purposes. These include amounts paid to you to aid you in the

pursuit of graduate or postdoctoral study and included in

your gross income under the rules discussed in this chapter. Taxable amounts not reported to you on Form W-2 are

generally included in gross income, as discussed later under Reporting Scholarships and Fellowship Grants. For

more information about IRAs, see Pub. 590-A and Pub.

590-B.

Higher education emergency grants. Emergency financial aid grants under the following are not included in

your gross income.

• The CARES Act.

• The Coronavirus Response and Relief Supplemental

Appropriations Act, 2021.

• The American Rescue Plan Act of 2021.

Also, for purposes of the American opportunity credit

(see chapter 2) and lifetime learning credit (see chapter 3), a student does not reduce an amount of qualified

tuition and related expenses by the amount of an emergency financial aid grant. For more information, see

Higher Education Emergency Grants Frequently Asked

Questions on IRS.gov.

8815

8863 Education Credits

8863

See chapter 12 for information about getting these publications and forms.

Introduction

This chapter discusses the income tax treatment of various types of educational assistance you may receive if

you are studying, teaching, or researching in the United

States. The educational assistance can be for a primary or

secondary school, a college or university, or a vocational

school. Included are discussions of:

• Scholarships;

• Fellowship grants;

• Need-based education grants, such as a Pell grant;

and

Chapter 1

Scholarships, Fellowship Grants, Grants, and

Tuition Reductions

Publication 970 (2025)

• Qualified tuition reductions.

• It doesn’t represent payment for teaching, research, or

Many types of educational assistance are tax free if they

meet the requirements discussed here.

Special rules apply to U.S. citizens and resident aliens

who have received scholarships or fellowship grants for

studying, teaching, or researching abroad. For information

about these rules, see Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

Scholarships and Fellowship

Grants

A scholarship is generally an amount paid or allowed to, or

for the benefit of, a student (whether an undergraduate or

a graduate) at an educational institution to aid in the pursuit of their studies.

A fellowship grant is generally an amount paid for the

benefit of an individual to aid in the pursuit of study or research.

Amount of scholarship or fellowship grant. The

amount of a scholarship or fellowship grant includes the

following.

• The value of contributed services and accommoda-

tions. This includes such services and accommodations as room (lodging), board (meals), laundry service, and similar services or accommodations that are

received by an individual as a part of a scholarship or

fellowship grant.

• The amount of tuition, matriculation, and other fees

that are paid for or remitted to the student to aid the

student in pursuing study or research.

• Any amount received in the nature of a family allowance as a part of a scholarship or fellowship grant.

Tax-Free Scholarships and Fellowship

Grants

A scholarship or fellowship grant is tax free (excludable

from gross income) only if you are a candidate for a degree at an eligible educational institution.

You may be able to increase the combined value

TIP of an education credit and certain educational assistance if the student includes some or all of the

educational assistance in income in the year it is received.

See the examples under Coordination with Pell grants and

other scholarships in chapter 2 and chapter 3.

A scholarship or fellowship grant is tax free only to the

extent:

• It doesn’t exceed your qualified education expenses;

• It isn’t designated or earmarked for other purposes

(such as room and board), and doesn’t require (by its

terms) that it can’t be used for qualified education expenses; and

Publication 970 (2025)

Chapter 1

other services required as a condition for receiving the

scholarship. For exceptions, see Payment for services,

later.

Use Worksheet 1-1 to figure the amount of a scholarship or fellowship grant you can exclude from gross income.

Candidate for a degree. You are a candidate for a degree if you:

1. Attend a primary or secondary school or are pursuing

a degree at a college or university; or

2. Attend an educational institution that:

a. Provides a program that is acceptable for full

credit toward a bachelor’s or higher degree, or offers a program of training to prepare students for

gainful employment in a recognized occupation;

and

b. Is authorized under federal or state law to provide

such a program and is accredited by a nationally

recognized accreditation agency.

Eligible educational institution. An eligible educational

institution is one whose primary function is the presentation of formal instruction and that normally maintains a

regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place

where it regularly carries on its educational activities.

Qualified education expenses. For purposes of tax-free

scholarships and fellowship grants, these are expenses

for:

• Tuition and fees required to enroll at or attend an eligible educational institution; and

• Course-related expenses, such as fees, books, sup-

plies, and equipment that are required for the courses

at the eligible educational institution. These items

must be required of all students in your course of instruction.

Expenses that don’t qualify. Qualified education expenses don’t include the cost of:

• Room and board,

• Travel,

• Research,

• Clerical help, or

• Equipment and other expenses that aren’t required for

enrollment in or attendance at an eligible educational

institution.

Payment for services. Generally, you can’t exclude from

your gross income the part of any scholarship or fellowship grant that represents payment for teaching, research,

or other services required as a condition for receiving the

scholarship. This applies even if all candidates for a degree must perform the services to receive the degree.

However, see Exceptions next.

Scholarships, Fellowship Grants, Grants, and

Tuition Reductions

Worksheet 1-1. Taxable Scholarship and

Fellowship Grant Income

Keep for Your Records

Enter the total amount of any scholarship or fellowship grant for 2025. See Amount of

scholarship or fellowship grant, earlier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• If you are a degree candidate at an eligible educational institution, go to line 2.

• If you aren’t a degree candidate at an eligible educational institution, stop here. The

entire amount is taxable. For information on how to report this amount on your tax return,

see Reporting Scholarships and Fellowship Grants, earlier.

Enter the amount from line 1 that was for teaching, research, or any other services required

as a condition for receiving the scholarship. Don’t include amounts received for these items

under the National Health Service Corps Scholarship Program, the Armed Forces Health

Professions Scholarship and Financial Assistance Program, or a comprehensive student

work-learning-service program (as defined in section 448(e) of the Higher Education Act of

1965) operated by a work college (as defined in that section) . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Enter the amount from line 3 that your scholarship or fellowship grant required you to use for

other than qualified education expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Enter the amount of your qualified education expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Enter the smaller of line 5 or line 6. This amount is the most you can exclude from your gross

income (the tax-free part of the scholarship or fellowship grant) . . . . . . . . . . . . . . . . . . . . . . . .

Subtract line 7 from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Taxable part. Add lines 2, 4, and 8. See Reporting Scholarships and Fellowship Grants,

earlier, for information on how to report this amount on your tax return . . . . . . . . . . . . . . . . . . .

Exceptions. You don’t have to treat as payment for

services the part of any scholarship or fellowship grant

that represents payment for teaching, research, or other

services if you receive the amount under:

• The National Health Service Corps Scholarship Program,

• The Armed Forces Health Professions Scholarship

and Financial Assistance Program, or

• A comprehensive student work-learning-service pro-

gram (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college (as defined in that section).

Example 1. You received a scholarship of $2,500. The

scholarship wasn’t received under any of the exceptions

mentioned above. As a condition for receiving the scholarship, you must serve as a part-time teaching assistant. Of

the $2,500 scholarship, $1,000 represents payment for

teaching. The provider of your scholarship gives you a

Form W-2 showing $1,000 as income. Your qualified education expenses were at least $1,500. Assuming that all

other conditions are met, the most you can exclude from

your gross income is $1,500. The $1,000 you received for

teaching must be included in your gross income.

Example 2. You are a candidate for a degree at a

medical school. You receive a scholarship (not under any

of the exceptions mentioned above) for your medical education and training. The terms of your scholarship require

you to perform future services. A substantial penalty applies if you don’t comply. The entire amount of your grant

Chapter 1

is taxable as payment for services in the year it is received.

Athletic Scholarships

An athletic scholarship is tax free only if and to the extent

it meets the requirements discussed earlier.

Worksheet 1-1. You can use Worksheet 1-1 to figure the

tax-free and taxable parts of your athletic scholarship.

Taxable Scholarships and Fellowship

Grants

If and to the extent your scholarship or fellowship grant

doesn’t meet the requirements described earlier, it is taxable and must be included in gross income. You can use

Worksheet 1-1 to figure the tax-free and taxable parts of

your scholarship or fellowship grant.

Reporting Scholarships and

Fellowship Grants

Whether you must report your scholarship or fellowship

grant depends on whether you must file a return and

whether any part of your scholarship or fellowship grant is

taxable.

If your only income is a completely tax-free scholarship

or fellowship grant, you don’t have to file a tax return and

no reporting is necessary. If all or part of your scholarship

or fellowship grant is taxable and you are required to file a

Scholarships, Fellowship Grants, Grants, and

Tuition Reductions

Publication 970 (2025)

tax return, report the taxable amount as explained below.

You must report the taxable amount whether or not you received a Form W-2. If you receive an incorrect Form W-2,

ask the payer for a corrected one.

For information on whether you must file a return, see

Pub. 501, Dependents, Standard Deduction, and Filing Information, or your income tax form instructions.

How To Report

How you report any taxable scholarship or fellowship grant

income depends on which return you file.

Form 1040 or 1040-SR. If you file Form 1040 or

1040-SR, include any taxable amount reported to you in

box 1 of Form W-2 in the total on line 1a. Include any taxable amount not reported to you in box 1 of Form W-2 on

Schedule 1 (Form 1040), line 8r.

Form 1040-NR. If you file Form 1040-NR, report any taxable amount on Schedule 1 (Form 1040), line 8r. Generally, you must report the amount reported to you in box 2

of Form(s) 1042-S, Foreign Person’s U.S. Source Income

Subject to Withholding. For more information, see the Instructions for Form 1040-NR.

Other Types of

Educational Assistance

The following discussions deal with other common types

of educational assistance.

Fulbright Grants

A Fulbright grant is generally treated as a scholarship or

fellowship grant in figuring how much of the grant is tax

free.

Pell Grants and Other Title IV

Need-Based Education Grants

These need-based grants are treated as scholarships for

purposes of determining their tax treatment. They are tax

free to the extent used for qualified education expenses

during the period for which a grant is awarded.

Payment to Service Academy Cadets

An appointment to a U.S. military academy isn’t a scholarship or fellowship grant. Payment you receive as a cadet

or midshipman at an armed services academy is pay for

personal services and will be reported to you in box 1 of

Form W-2. Include this pay in your income in the year you

receive it.

Publication 970 (2025)

Chapter 1

Veterans’ Benefits

Payments you receive for education, training, or subsistence under any law administered by the Department of

Veterans Affairs (VA) are tax free. Don't include these payments as income on your federal tax return.

If you qualify for one or more of the education tax benefits discussed in chapters 2 through 11, you may have to

reduce the amount of education expenses qualifying for a

specific tax benefit by part or all of your VA payments. This

applies only to the part of your VA payments that is required to be used for education expenses.

You may want to visit the Veterans Administration website at www.va.gov/education for specific information

about the various VA benefits for education.

Example. You have returned to college and are receiving two education benefits under the latest GI Bill: (1) a

$1,534 monthly basic housing allowance (BHA) that is directly deposited to your checking account, and (2) $3,840

paid directly to your college for tuition. Neither of these

benefits is taxable and you don’t report them on your tax

return. You also want to claim an American opportunity

credit on your return. Your total tuition charges are $5,000.

To figure the amount of credit, you must first subtract the

$3,840 from your qualified education expenses because

this payment under the GI Bill was required to be used for

education expenses. You don’t subtract any amount of

the BHA because it was paid to you and its use wasn’t restricted.

Qualified Tuition Reduction

If you are allowed to study tuition free or for a reduced rate

of tuition, you may not have to pay tax on this benefit. This

is called a tuition reduction. You don’t have to include a

qualified tuition reduction in your income.

A tuition reduction is qualified only if you receive it from,

and use it at, an eligible educational institution. You don’t

have to use the tuition reduction at the eligible educational

institution from which you received it. In other words, if you

work for an eligible educational institution and the institution arranges for you to take courses at another eligible

educational institution without paying any tuition, you may

not have to include the value of the free courses in your income.

The rules for determining if a tuition reduction is qualified, and therefore tax free, are different if the education

provided is below the graduate level or is graduate education.

You must include in your income any tuition reduction

you receive that is payment for your services.

Eligible educational institution. An eligible educational

institution is one that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it regularly carries

on its educational activities.

Scholarships, Fellowship Grants, Grants, and

Tuition Reductions

Officers, owners, and highly compensated employees. Qualified tuition reductions apply to officers, owners,

or highly compensated employees only if benefits are

available to employees on a nondiscriminatory basis. This

means that the tuition reduction benefits must be available

on substantially the same basis to each member of a

group of employees. The group must be defined under a

reasonable classification set up by the employer. The

classification must not discriminate in favor of owners, officers, or highly compensated employees.

Payment for services. Generally, you must include in income the part of any qualified tuition reduction that represents payment for teaching, research, or other services by

the student required as a condition of receiving the qualified tuition reduction. This applies even if all candidates

for a degree must perform the services to receive the degree. However, see Exceptions next.

Exceptions. You don’t have to include in income the

part of any scholarship or fellowship grant that represents

payment for teaching, research, or other services if you receive the amount under:

• The National Health Service Corps Scholarship Program,

• The Armed Forces Health Professions Scholarship

and Financial Assistance Program, or

• A comprehensive student work-learning-service pro-

gram (as defined in section 448(e) of the Higher Education Act of 1965) operated by a work college (as defined in that section).

Education Below the Graduate Level

If you receive a tuition reduction for education below the

graduate level (including primary and secondary school),

it is a qualified tuition reduction, and therefore tax free,

only if your relationship to the educational institution providing the benefit is described below.

1. You are an employee of the eligible educational institution.

2. You were an employee of the eligible educational institution, but you retired or left on disability.

3. You are the surviving spouse of an individual who died

while an employee of the eligible educational institution or who retired or left on disability.

4. You are the dependent child or spouse of an individual described in (1) through (3) above.

Child of deceased parents. For purposes of the qualified tuition reduction, a child is a dependent child if the

child is under age 25 and both parents have died.

Child of divorced parents. For purposes of the qualified tuition reduction, a dependent child of divorced parents is treated as the dependent of both parents.

Chapter 2

Graduate Education

A tuition reduction you receive for graduate education is

qualified, and therefore tax free, if both of the following requirements are met.

• It is provided by an eligible educational institution.

• You are a graduate student who performs teaching or

research activities for the educational institution.

You must include in income any other tuition reductions for

graduate education that you receive.

How To Report

Any tuition reduction that is taxable should be included as

wages in box 1 of your Form W-2. Report the amount from

box 1 of Form W-2 on Form 1040 or 1040-SR, line 1a.

American Opportunity

Credit

Reminders

Educational institution’s EIN required. To claim the

American opportunity credit, you must provide the educational institution’s employer identification number (EIN) on

your Form 8863. You should be able to obtain this information from Form 1098-T or the educational institution.

Form 8862 may be required. If your American opportunity credit was denied or reduced for any reason other

than a math or clerical error for any tax year beginning after 2015, you must attach a completed Form 8862, Information To Claim Certain Credits After Disallowance, to

your tax return for the next year for which you claim the

credit. See Form 8862 and its instructions for details.

Form 1098-T requirement. To be eligible to claim the

American opportunity credit, the law requires a taxpayer

(or a dependent) to have received Form 1098-T, Tuition

Statement, from an eligible educational institution,

whether domestic or foreign.

However, you may claim the credit if the student doesn’t

receive a Form 1098-T because the student’s educational

institution isn’t required to furnish a Form 1098-T to the

student under existing rules (for example, if the student is

a qualified nonresident alien, has qualified education expenses paid entirely with scholarships, has qualified education expenses paid under a formal billing arrangement,

or is enrolled in courses for which no academic credit is

awarded). If a student’s educational institution isn’t required to provide a Form 1098-T to the student, you may

claim the credit without a Form 1098-T if you otherwise

American Opportunity Credit

Publication 970 (2025)

qualify, can demonstrate that you (or a dependent) were

enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and related expenses.

You may also claim a credit if the student attended an

eligible educational institution required to furnish Form

1098-T but the student doesn’t receive Form 1098-T before you file your tax return (for example, if the institution is

otherwise required to furnish the Form 1098-T and doesn’t

furnish it or refuses to do so) and you take the following required steps: After February 2, 2026 (January 31 falls on a

Saturday), but before you file your 2025 tax return, you or

the student must request that the educational institution

furnish a Form 1098-T. You must fully cooperate with the

educational institution’s efforts to gather the information

needed to furnish the Form 1098-T. You must also otherwise qualify for the benefit, be able to demonstrate that

you (or a dependent) were enrolled at an eligible educational institution, and substantiate the payment of qualified

tuition and related expenses.

Ban on claiming the American opportunity credit. If

you claim the American opportunity credit even though

you’re not eligible, you may be banned from claiming the

credit for 2 or 10 years depending on your conduct. See

Caution under Introduction below.

Taxpayer identification number (TIN) needed by due

date of return. If you haven’t been issued a TIN by the

due date of your 2025 return (including extensions), you

can’t claim the American opportunity credit on either your

original or an amended 2025 return. Also, the American

opportunity credit isn’t allowed on either your original or an

amended 2025 return for a student who hasn’t been issued a TIN by the due date of your return (including extensions).

Introduction

For 2025, there are two tax credits available to help you

offset the costs of higher education by reducing the

amount of your income tax. They are the American opportunity credit (this chapter) and the lifetime learning credit

(chapter 3).

This chapter explains:

• Who can claim the American opportunity credit,

• What expenses qualify for the credit,

• Who is an eligible student,

• Who can claim a dependent’s expenses,

• How to figure the credit,

• How to claim the credit, and

• When the credit must be repaid.

What is the tax benefit of the American opportunity

credit? For 2025, you may be able to claim a credit of up

to $2,500 for adjusted qualified education expenses paid

for each student who qualifies for the American opportunity credit.

A tax credit reduces the amount of income tax you may

have to pay. Unlike a deduction, which reduces the

Publication 970 (2025)

Chapter 2

amount of income subject to tax, a credit directly reduces

the tax itself. Forty percent of the American opportunity

credit may be refundable. This means that if the refundable portion of your credit is more than your tax, the excess

will be refunded to you.

Your allowable American opportunity credit may be limited by the amount of your income. Also, the nonrefundable

part of the credit may be limited by the amount of your tax.

Overview of the American opportunity credit for

2025. See Table 2-1 for the basics of this credit. The details are discussed in this chapter.

Can you claim more than one education credit this

year? For each student, you can elect for any year only

one of the credits. For example, if you elect to claim the

American opportunity credit for a dependent on your 2025

tax return, you can’t use that same dependent’s qualified

education expenses to figure the lifetime learning credit for

2025.

If you pay qualified education expenses for more than

one student in the same year, you can choose to claim the

American opportunity credit on a per-student, per-year basis. If you pay qualified education expenses for a student

(or students) for whom you don’t claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. This means that, for

example, you can claim the American opportunity credit

for one student and the lifetime learning credit for another

student in the same year.

Differences between the American opportunity and

lifetime learning credits. There are several differences

between these two credits. For example, you can claim

the American opportunity credit based on the same student’s expenses for no more than 4 tax years. However,

there is no limit on the number of years for which you can

claim a lifetime learning credit based on the same student’s expenses. The differences between these credits

are shown in the Appendix near the end of this publication.

If you claim the American opportunity credit for

TIP any student, you can choose between using that

student’s adjusted qualified education expenses

for the American opportunity credit or the lifetime learning

credit. If you have the choice, the American opportunity

credit will always be greater than the lifetime learning

credit.

Form 8862 may be required. If your American opportunity credit was denied or reduced for any reason other

than a math or clerical error for any tax year beginning after 2015, you must attach a completed Form 8862 to your

tax return for the next tax year for which you claim the

credit. See Form 8862 and its instructions for details.

American Opportunity Credit

Don’t claim the American opportunity credit for 2

years after there was a final determination that

CAUTION your claim was due to reckless or intentional disregard of the rules, or 10 years after there was a final determination that your claim was due to fraud. If you disagree with the final determination, see the Instructions for

Form 8862.

Table 2-1. Overview of the American Opportunity Credit for 2025

Maximum credit

Up to $2,500 credit per eligible student

Limit on modified adjusted gross income

(MAGI)

$180,000 if married filing jointly; $90,000 if single, head of household, or qualifying

surviving spouse

Refundable or nonrefundable

40% of credit may be refundable; the rest is nonrefundable

Number of years of postsecondary education

Available ONLY if the student had not completed the first 4 years of postsecondary

education before 2025 (generally, the freshman through senior years, determined by

the eligible educational institution, not including academic credit awarded solely

because of the student’s performance on proficiency examinations)

Number of tax years credit available

Available ONLY for 4 tax years per eligible student

Type of program required

Student must be pursuing a program leading to a degree or other recognized

education credential

Number of courses

Student must be enrolled at least half-time for at least one academic period that

begins during 2025 (or the first 3 months of 2026 if the qualified expenses were paid

in 2025)

Felony drug conviction

As of the end of 2025, the student had not been convicted of a felony for possessing

or distributing a controlled substance

Qualified expenses

Tuition, required enrollment fees, and course materials that the student needs for a

course of study whether or not the materials are bought at the educational institution

as a condition of enrollment or attendance

Payments for academic periods

Payments made in 2025 for academic periods beginning in 2025 or beginning in the

first 3 months of 2026

TIN needed by filing due date

Filers and students must have been issued a TIN by the due date of their 2025 return

(including extensions)

Educational institution’s EIN

You must provide the educational institution’s employer identification number (EIN) on

your Form 8863

Can You Claim the Credit?

Note: Qualified education expenses paid by a dependent you claim on your tax return, or by a third party for that

dependent, are considered paid by you.

The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return.

Student qualifications. Generally, you can claim the

American opportunity credit for a student only if all of the

following four requirements are met.

Who Can Claim the Credit?

1. As of the beginning of 2025, the student had not completed the first 4 years of postsecondary education

(generally, the freshman through senior years of college), as determined by the eligible educational institution. For this purpose, don’t include academic credit

awarded solely because of the student’s performance

on proficiency examinations.

Generally, you can claim the American opportunity credit if

all three of the following requirements are met.

• You pay qualified education expenses of higher education.

• You pay the education expenses for an eligible student.

• The eligible student is either yourself, your spouse, or

2. The American opportunity credit has not been

claimed by you or anyone else (see below) for this

a dependent you claim on your tax return.

Chapter 2

American Opportunity Credit

Publication 970 (2025)

student for any 4 tax years before 2025. If the American opportunity credit has been claimed for this student for any 3 or fewer tax years before 2025, this requirement is met.

3. For at least one academic period beginning (or treated as beginning) in 2025, the student both:

a. Was enrolled in a program that leads to a degree,

certificate, or other recognized educational credential; and

b. Carried at least one-half the normal full-time workload for his or her course of study.

The standard for what is half of the normal

full-time workload is determined by each eligible

educational institution. However, the standard may

not be lower than any of those established by the

U.S. Department of Education under the Higher

Education Act of 1965.

For 2025, treat an academic period beginning

in the first 3 months of 2026 as if it began in 2025

if qualified education expenses for the student

were paid in 2025 for that academic period. See

Prepaid expenses, later.

4. As of the end of 2025, the student had not been convicted of a federal or state felony for possessing or

distributing a controlled substance.

Example 1. Sharon was eligible for the American opportunity credit for 2019, 2020, 2022, and 2024. Sharon’s

parents claimed the American opportunity credit for

Sharon on their 2019, 2020, and 2022 tax returns. Sharon

claimed the American opportunity credit on her 2024 tax

return. The American opportunity credit has been claimed

for Sharon for 4 tax years before 2025. Therefore, the

American opportunity credit can’t be claimed for Sharon

for 2025. If Sharon files Form 8863 for 2025, the box on

line 23 should be checked “Yes” and only the lifetime

learning credit would be able to be claimed.

Example 2. Wilbert was eligible for the American opportunity credit for 2021, 2022, 2023, and 2025. Wilbert’s

parents claimed the American opportunity credit for Wilbert on their tax returns for 2021, 2022, and 2023. No one

claimed an American opportunity credit for Wilbert for any

other tax year. The American opportunity credit has been

claimed for Wilbert for only 3 tax years before 2025.

Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. If Wilbert files

Form 8863 for 2025, the box on line 23 should be checked

“No.” If Wilbert meets all of the other requirements, he is

eligible for the American opportunity credit.

Example 3. Glenda enrolls on a full-time basis in a degree program for the 2026 spring semester, which begins

in January 2026. Glenda pays the tuition for the 2026

spring semester in December 2025. Because the tuition

Glenda paid in 2025 relates to an academic period that

begins in the first 3 months of 2026, the eligibility to claim

an American opportunity credit in 2025 is determined as if

the 2026 spring semester began in 2025. Therefore,

Glenda satisfies this third requirement.

Publication 970 (2025)

Chapter 2

If the requirements above aren’t met for any stu-

TIP dent, you can’t claim the American opportunity

credit for that student. You may be able to claim

the lifetime learning credit for part or all of that student’s

qualified education expenses instead.

“Qualified education expenses” are defined later under

Qualified Education Expenses. “Eligible students” are defined later under Who Is an Eligible Student. A dependent

you claim on your tax return is defined later under Who

Can Claim a Dependent’s Expenses.

You may find Figure 2-1 helpful in determining if you

can claim an American opportunity credit on your tax return.

Who Can’t Claim the Credit?

You can’t claim the American opportunity credit for 2025 if

any of the following apply.

• Your filing status is married filing separately.

• You are claimed as a dependent on another person’s

tax return, such as your parent’s return. See Who Can

Claim a Dependent’s Expenses, later.

• Your modified adjusted gross income (MAGI) is

$90,000 or more ($180,000 or more if married filing

jointly). MAGI is explained later under Effect of the

Amount of Your Income on the Amount of Your Credit.

• You (or your spouse) were a nonresident alien for any

part of 2025 and the nonresident alien didn’t elect to

be treated as a resident alien for tax purposes. More

information on nonresident aliens can be found in Pub.

519, U.S. Tax Guide for Aliens.

• You weren’t issued an SSN (or ITIN) by the due date

of your 2025 return (including extensions). You can’t

claim the American opportunity credit on either your

original or an amended 2025 return. Also, you can’t

claim this credit on your original or an amended 2025

return for a student who wasn’t issued an SSN, ATIN,

or ITIN by the due date of your return (including extensions). If an ATIN or ITIN is applied for on or before the

due date of a 2025 return (including extensions) and

the IRS issues an ATIN or ITIN as a result of the application, the IRS will consider the ATIN or ITIN as issued on or before the due date of the return.

What Expenses Qualify?

The American opportunity credit is based on adjusted

qualified education expenses you pay for yourself, your

spouse, or a dependent you claim on your tax return. Generally, the credit is allowed for adjusted qualified education

expenses paid in 2025 for an academic period beginning

in 2025 or beginning in the first 3 months of 2026.

For example, if you paid $1,500 in December 2025 for

qualified tuition for the spring 2026 semester beginning

January 2026, you can use that $1,500 in figuring your

2025 credit.

American Opportunity Credit

Figure 2-1. Can You Claim the American Opportunity Credit for 2025?

Did you pay qualified education expenses in 2025 for an eligible student?*

Yes

Did the academic period for which you paid qualified education

expenses begin in 2025 or the first 3 months of 2026?

Yes

Is the eligible student you, your spouse (if married filing jointly), or your

dependent you claim on your tax return?

Yes

Are you listed as a dependent on another person’s tax return?

Yes

Is your filing status married filing separately?

For any part of 2025, were you (or your spouse) a nonresident alien

who didn’t elect to be treated as a resident alien for tax purposes?

Yes

Is your modified adjusted gross income (MAGI) less than $90,000

($180,000 if married filing jointly)?

Yes

Did you use the same expenses to claim a deduction or credit?

Yes

Were the same expenses paid entirely with a tax-free scholarship, grant, or

employer-provided educational assistance?

Did you or someone else receive a refund of all the expenses?

Yes

You can’t

claim the American

opportunity credit

for 2025.

You can claim

the American

opportunity credit

for 2025.**

*Qualified education expenses paid by a dependent you claim on your tax return, or by a third party for that dependent, are considered

paid by you.

**Your education credits may be limited to your tax liability minus certain credits. See Form 8863 for more details.

Academic period. An academic period includes a semester, trimester, quarter, or other period of study (such

as a summer school session) as reasonably determined

by an educational institution. If an educational institution

uses credit hours or clock hours and doesn’t have academic terms, each payment period can be treated as an

academic period.

Paid with borrowed funds. You can claim an American

opportunity credit for qualified education expenses paid

with the proceeds of a loan. Use the expenses to figure

the American opportunity credit for the year in which the

Chapter 2

expenses are paid, not the year in which the loan is repaid. Treat loan payments sent directly to the educational

institution as paid on the date the institution credits the

student’s account.

Student withdraws from class(es). You can claim an

American opportunity credit for qualified education expenses not refunded when a student withdraws.

American Opportunity Credit

Publication 970 (2025)

Qualified Education Expenses

For purposes of the American opportunity credit, qualified

education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution.

Eligible educational institution. An eligible educational

institution is any college, university, vocational school, or

other postsecondary educational institution eligible to participate in a student aid program administered by the U.S.

Department of Education. Virtually all accredited public,

nonprofit, and proprietary (privately owned profit-making)

postsecondary institutions meet this definition.

An eligible educational institution also includes certain

educational institutions located outside the United States

that are eligible to participate in a student aid program administered by the U.S. Department of Education.

The educational institution should be able to tell

TIP you if it is an eligible educational institution.

Related expenses. Student activity fees are included in

qualified education expenses only if the fees must be paid

to the institution as a condition of enrollment or attendance.

However, expenses for books, supplies, and equipment

needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution.

books from a friend; Grace bought the books at College

W’s bookstore. Both are qualified education expenses for

the American opportunity credit.

Example 3. When Kelly enrolled at College X for the

freshman year, the school required payment of a separate

student activity fee in addition to the tuition. This activity

fee is required of all students, and is used solely to fund

on-campus organizations and activities run by students,

such as the student newspaper and the student government. No portion of the fee covers personal expenses. Although labeled as a student activity fee, the fee is required

for Kelly’s enrollment and attendance at College X and is a

qualified expense.

No Double Benefit Allowed

You can’t do any of the following.

• Deduct higher education expenses on your income

tax return (as, for example, a business expense) and

also claim an American opportunity credit based on

those same expenses.

• Claim an American opportunity credit for any student

and use any of that student’s expenses in figuring your

lifetime learning credit.

• Figure the tax-free portion of a distribution from a Cov-

erdell education savings account (ESA) or qualified

tuition program (QTP) using the same expenses you

used to figure the American opportunity credit. See

Coordination With American Opportunity and Lifetime

Learning Credits in chapter 6 and Coordination With

American Opportunity and Lifetime Learning Credits in

chapter 7.

Prepaid expenses. Qualified education expenses paid

in 2025 for an academic period that begins in the first 3

months of 2026 can be used in figuring an education

credit for 2025 only. See Academic period, earlier. For example, if you pay $2,000 in December 2025 for qualified

tuition for the 2026 winter quarter that begins in January

2026, you can use that $2,000 in figuring an education

credit for 2025 only (if you meet all the other requirements).

• Claim a credit based on qualified education expenses

You can’t use any amount you paid in 2024 or

2026 to figure the qualified education expenses

CAUTION you use to figure your 2025 education credit(s).

Adjustments to Qualified Education

Expenses

In the following examples, assume that each student is

an eligible student at an eligible educational institution.

For each student, reduce the qualified education expenses paid by or on behalf of that student under the following

rules. The result is the amount of adjusted qualified education expenses for each student.

Example 1. Jefferson is a sophomore in University V’s

degree program in dentistry. This year, in addition to tuition, there is a requirement to pay a fee to the university for

the rental of the dental equipment used in this program.

Because the equipment rental is needed for this course of

study, Jefferson’s equipment rental fee is a qualified expense.

Example 2. Grace and William, both first-year students at College W, are required to have certain books

and other reading materials to use in their mandatory

first-year classes. The college has no policy about how

students should obtain these materials, but any student

who purchases them from College W’s bookstore will receive a bill directly from the college. William bought the

Publication 970 (2025)

Chapter 2

paid with tax-free educational assistance, such as a

scholarship, grant, or assistance provided by an employer. See Adjustments to Qualified Education Expenses next.

Tax-free educational assistance. For tax-free educational assistance received in 2025, reduce the qualified

educational expenses for each academic period by the

amount of tax-free educational assistance allocable to that

academic period. See Academic period, earlier.

Some tax-free educational assistance received after

2025 may be treated as a refund of qualified education expenses paid in 2025. This tax-free educational assistance

is any tax-free educational assistance received by you or

anyone else after 2025 for qualified education expenses

paid on behalf of a student in 2025 (or attributable to enrollment at an eligible educational institution during 2025).

American Opportunity Credit

If this tax-free educational assistance is received after

2025 but before you file your 2025 income tax return, see

Refunds received after 2025 but before your income tax

return is filed, later. If this tax-free educational assistance

is received after 2025 and after you file your 2025 income

tax return, see Refunds received after 2025 and after your

income tax return is filed, later.

Tax-free educational assistance includes:

• The tax-free parts of scholarships and fellowship

grants (see Tax-Free Scholarships and Fellowship

Grants in chapter 1),

• The tax-free part of Pell grants (see Pell Grants and

Other Title IV Need-Based Education Grants in chapter 1),

• Employer-provided educational assistance (see chapter 10),

• Veterans’ educational assistance (see Veterans’ Benefits in chapter 1), and

• Any other nontaxable (tax-free) payments (other than

gifts or inheritances) received as educational assistance.

Generally, any scholarship or fellowship grant is treated

as tax free. However, a scholarship or fellowship grant isn’t

treated as tax free to the extent the student includes it in

gross income (the student may or may not be required to

file a tax return for the year the scholarship or fellowship

grant is received) and either of the following is true.

• The scholarship or fellowship grant (or any part of it)

must be applied (by its terms) to expenses (such as

room and board) other than qualified education expenses as defined in Qualified education expenses in

chapter 1.

• The scholarship or fellowship grant (or any part of it)

may be applied (by its terms) to expenses (such as

room and board) other than qualified education expenses as defined in Qualified education expenses in

chapter 1.

A student can’t choose to include in income a

scholarship or fellowship grant provided by an InCAUTION dian tribal government that is excluded from income under the Tribal General Welfare Exclusion Act of

2014 or benefits provided by an educational program described in Revenue Procedure 2014-35, section 5.02(2)(b)

(ii), available at IRS.gov/irb/2014-26_IRB#RP-2014-35.

You may be able to increase the combined value

TIP of an education credit if the student includes

some or all of a scholarship or fellowship grant in

income in the year it is received. For examples, see Coordination with Pell grants and other scholarships, later.

Refunds. A refund of qualified education expenses may

reduce adjusted qualified education expenses for the tax

year or require repayment (recapture) of a credit claimed

in an earlier year. Some tax-free educational assistance

received after 2025 may be treated as a refund. See

Tax-free educational assistance, earlier.

Chapter 2

Refunds received in 2025. For each student, figure

the adjusted qualified education expenses for 2025 by

adding all the qualified education expenses for 2025 and

subtracting any refunds of those expenses received from

the eligible educational institution during 2025.

Refunds received after 2025 but before your income tax return is filed. If anyone receives a refund after 2025 of qualified education expenses paid on behalf of

a student in 2025 and the refund is paid before you file an

income tax return for 2025, the amount of qualified education expenses for 2025 is reduced by the amount of the refund.

Refunds received after 2025 and after your income

tax return is filed. If anyone receives a refund after 2025

of qualified education expenses paid on behalf of a student in 2025 and the refund is paid after you file an income tax return for 2025, you may need to repay some or

all of the credit. See Credit recapture next.

Credit recapture. If any tax-free educational assistance

for the qualified education expenses paid in 2025, or any

refund of your qualified education expenses paid in 2025,

is received after you file your 2025 income tax return, you

must recapture (repay) any excess credit. You do this by

refiguring the amount of your adjusted qualified education

expenses for 2025 by reducing the expenses by the

amount of the refund or tax-free educational assistance.

You then refigure your education credit(s) for 2025 and figure the amount by which your 2025 tax liability would have

increased if you claimed the refigured credit(s). Include

that amount as an additional tax for the year the refund or

tax-free assistance was received.

Example. You paid $7,000 tuition and fees in August

2025, and your child began college in September 2025.

You filed your 2025 tax return on February 17, 2026, and

claimed an American opportunity credit of $2,500. After

you filed your return, you received a refund of $4,000. You

must refigure your 2025 American opportunity credit using

$3,000 of qualified education expenses instead of $7,000.

The refigured credit is $2,250. The increase to your tax liability is $250. Include the difference of $250 as additional

tax on your 2026 tax return. See the instructions for your

2026 income tax return to determine where to include this

tax.

If you pay qualified education expenses in both

TIP 2025 and 2026 for an academic period that be-

gins in the first 3 months of 2026 and you receive

tax-free educational assistance, or a refund, as described

above, you may choose to reduce your qualified education

expenses for 2026 instead of reducing your expenses for

2025.

Amounts that don’t reduce qualified education expenses. Don’t reduce qualified education expenses by

amounts paid with funds the student receives as:

• Payment for services, such as wages;

• A loan;

• A gift;

American Opportunity Credit

Publication 970 (2025)

• An inheritance; or

• A withdrawal from the student’s personal savings.

Don’t reduce the qualified education expenses by any

scholarship or fellowship grant reported as income on the

student’s tax return in the following situations.

• The use of the money is restricted, by the terms of the

scholarship or fellowship grant, to costs of attendance

(such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1.

• The use of the money isn’t restricted.

Example 1. Joan paid $3,000 for tuition and $5,000 for

room and board at University X. The university did not require payment of any fees in addition to the tuition in order

to enroll in or attend classes. To help pay these costs,

Joan was awarded a $2,000 scholarship and a $4,000

student loan. The terms of the scholarship state that it can

be used to pay any of Joan’s college expenses.

University X applies the $2,000 scholarship against

Joan’s $8,000 total bill, and Joan pays the $6,000 balance

of the bill from University X with a combination of the student loan and personal savings. Joan doesn’t report any

portion of the scholarship as income on the tax return.

In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce the

qualified education expenses by the amount of the scholarship ($2,000) because the entire scholarship was excluded from the reported income on Joan’s tax return. The

student loan isn’t tax-free educational assistance, so the

qualified expenses don’t need to be reduced by any part

of the loan proceeds. Joan is treated as having paid

$1,000 in qualified education expenses ($3,000 tuition −

$2,000 scholarship).

Example 2. The facts are the same as in Example 1,

except that Joan reports the entire scholarship as income

on the tax return. Because Joan reported the entire

$2,000 scholarship as income, the qualified education expenses don’t need to be reduced. Joan is treated as having paid $3,000 in qualified education expenses.

Coordination with Pell grants and other scholarships.

You may be able to increase your American opportunity

credit when the student (you, your spouse, or your dependent) includes certain scholarships or fellowship

grants in the student’s gross income. Your credit may increase only if the amount of the student’s qualified education expenses minus the total amount of scholarships and

fellowship grants is less than $4,000. If this situation applies, consider including some or all of the scholarship or

fellowship grant in the student’s income in order to treat

the included amount as paying nonqualified expenses instead of qualified education expenses. Nonqualified expenses are expenses such as room and board that aren’t

qualified education expenses such as tuition and related

fees.

Scholarships and fellowship grants that the student includes in income don’t reduce the student’s qualified education expenses available to figure your American

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Chapter 2

opportunity credit. Thus, including enough scholarship or

fellowship grant in the student’s income to report up to

$4,000 in qualified education expenses for your American

opportunity credit may increase the credit by enough to increase your tax refund or reduce the amount of tax you

owe even considering any increased tax liability from the

additional income. However, the increase in tax liability as

well as the loss of other tax credits may be greater than

the additional American opportunity credit and may cause

your tax refund to decrease or the amount of tax you owe

to increase. Your specific circumstances will determine

what amount, if any, of scholarship or fellowship grant to

include in income to maximize your tax refund or minimize

the amount of tax you owe.

The scholarship or fellowship grant must be one that may

qualify as a tax-free scholarship under the rules discussed

in chapter 1. Also, the scholarship or fellowship grant must

be one that may (by its terms) be used for nonqualified expenses. Finally, the amount of the scholarship or fellowship grant that is applied to nonqualified expenses can’t

exceed the amount of the student’s actual nonqualified expenses that are paid in the tax year. This amount may differ from the student’s living expenses estimated by the

student’s school in figuring the official cost of attendance

under student aid rules.

The fact that the educational institution applies the

scholarship or fellowship grant to qualified education expenses, such as tuition and related fees, doesn’t prevent

the student from choosing to apply certain scholarships or

fellowship grants to the student’s actual nonqualified expenses. By making this choice (that is, by including the

part of the scholarship or fellowship grant applied to the

student’s nonqualified expenses in income), the student

may increase taxable income and may be required to file a

tax return. But this allows payments made in cash, by

check, by credit or debit card, or with borrowed funds such

as a student loan to be applied to qualified education expenses.

Example 1—no scholarship. Bill, age 28 and unmarried, enrolled full-time in 2025 as a first-year student at a

local college to earn a degree in law enforcement. This

was Bill’s first year of postsecondary education. During

2025, Bill paid $5,600 for qualified education expenses

and $4,400 for room and board for the fall 2025 semester.

Bill and the college meet all the requirements for the

American opportunity credit. Bill’s adjusted gross income

(AGI) and MAGI, for purposes of figuring the credit, are

$39,250. Bill claims the standard deduction of $15,750,

resulting in taxable income of $23,500 and an income tax

liability before credits of $2,585. Bill claims no credits

other than the American opportunity credit. Bill figures the

American opportunity credit based on qualified education

expenses of $4,000, which results in a credit of $2,500

and a tax liability after credits of $85 ($2,585 − $2,500).

Example 2—scholarship excluded from income.

The facts are the same as in Example 1, except that Bill

was awarded a $5,600 scholarship. Under the terms of the

scholarship, it may be used to pay any educational expenses, including room and board. If Bill excludes the

American Opportunity Credit

scholarship from income, it will be deemed (for purposes

of figuring the education credit) to have been applied to

pay tuition, required fees, and course materials. Bill’s adjusted qualified education expenses would be zero, and

there would be no education credit. Therefore, Bill’s tax liability after credits would be $2,585.

Example 3—scholarship partially included in income. The facts are the same as in Example 2. If, unlike

Example 2, Bill includes $4,000 of the scholarship in income, the $4,000 will be deemed to have been applied to

pay for room and board. The remaining $1,600 of the

$5,600 scholarship would reduce the qualified education

expenses, and the adjusted qualified education expenses

would be $4,000. Bill’s AGI and MAGI would increase to

$43,250, the taxable income would increase to $27,500,

and the tax liability before credits would increase to

$3,065. Based on the adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity credit of $2,500, and the tax liability after credits

would be $565 ($3,065 − $2,500).

Example 4—scholarship applied by the postsecondary school to tuition. The facts are the same as in

Example 3, except the $5,600 scholarship is paid directly

to the local college. The fact that the local college applies

the scholarship to Bill’s tuition and related fees doesn’t

prevent Bill from including $4,000 of the scholarship in income. As in Example 3, by doing so, Bill will be deemed to

have applied $4,000 to pay for room and board. Bill would

be able to claim the American opportunity credit of

$2,500, and the tax liability after credits would be $565.

Example 5—student with a dependent child. Jane,

age 28 and unmarried, enrolled full-time as a first-year

student at a local technical college to get a certificate as a

computer technician. This was Jane’s first year of postsecondary education. During 2025, Jane paid $6,000 for

qualified education expenses. Jane and the college meet

all the requirements for the American opportunity credit.

Jane has a dependent child, age 10, who is a qualifying

child for purposes of receiving the earned income credit

(EIC) and the child tax credit. Jane’s wages are $24,125.

Jane withheld no income taxes on these wages and has

no other income or adjustments. Jane was awarded a

$5,500 scholarship. Under the terms of the scholarship, it

may be used to pay tuition and any living expense, including rent. Jane paid $10,000 in living expenses in 2025.

If Jane excludes the entire scholarship from income,

Jane will be deemed to have applied the entire scholarship to pay qualified education expenses. The AGI and

MAGI would be $24,125. The tax liability before any credits would be $51. The qualified education expenses would

be reduced to $500. Jane would be able to receive a $251

American opportunity credit ($200 refundable and $51

nonrefundable), a $1,700 additional child tax credit, and a

$4,204 EIC. In total, Jane would be able to receive a tax

refund of $6,104.

If Jane includes the entire scholarship in income, Jane

will be deemed to have applied the entire scholarship to

pay living expenses. The qualified education expenses

would be $6,000, and the AGI and MAGI would be

Chapter 2

$29,625. The tax liability before any credits would be

$603. Jane would be able to receive a $1,603 American

opportunity credit ($1,000 refundable and $603 nonrefundable), a $1,700 additional child tax credit, and a

$3,325 EIC. In total, Jane would be able to receive a tax

refund of $6,025.

If Jane includes $3,500 of the scholarship in income,

Jane will be deemed to have applied $3,500 of the scholarship to pay living expenses, and $2,000 to pay qualified

education expenses. The qualified education expenses

would be $4,000, and the AGI and MAGI would be

$27,625. The tax liability before any credits would be

$403. Jane would be able to receive a $1,403 American

opportunity credit ($1,000 refundable and $403 nonrefundable), a $1,700 additional child tax credit, and a

$3,645 EIC. In total, Jane would be able to receive a tax

refund of $6,345.

If Jane includes $1,500 of the scholarship in income,

Jane will be deemed to have applied $1,500 of the scholarship to pay living expenses, and $4,000 to pay qualified

education expenses. The qualified education expenses

would be $2,000, and the AGI and MAGI would be

$25,625. The tax liability before any credits would be

$201. Jane would be able to receive a $1,001 American

opportunity credit ($800 refundable and $201 nonrefundable), a $1,700 additional child tax credit, and a $3,964

EIC. In total, Jane would be able to receive a tax refund of

$6,464. This is the highest tax refund among these scenarios.

Note: Whether you will benefit from applying a scholarship or fellowship grant to nonqualified expenses will depend on the amount of the student’s qualified education

expenses, the amount of the scholarship or fellowship

grant, and whether the scholarship or fellowship grant may

(by its terms) be used for nonqualified expenses. Any benefit will also depend on the student’s federal and state

marginal tax rates as well as any federal and state tax

credits the student claims. Before deciding, look at the total amount of your federal and state tax refunds or taxes

owed and, if the student is your dependent, the student’s

tax refunds or taxes owed. For example, if you are the student and you also claim the EIC, choosing to apply a

scholarship or fellowship grant to nonqualified expenses

by including the amount in your income may benefit you if

the increase to your American opportunity credit is more

than the decrease to your EIC.

Expenses That Don’t Qualify

Qualified education expenses don’t include amounts paid

for:

• Insurance;

• Medical expenses (including student health fees);

• Room and board;

• Transportation; or

• Similar personal, living, or family expenses.

This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.

American Opportunity Credit

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Sports, games, hobbies, and noncredit courses.

Qualified education expenses generally don’t include expenses that relate to any course of instruction or other education that involves sports, games, or hobbies, or any

noncredit course. However, if the course of instruction or

other education is part of the student’s degree program,

these expenses can qualify.

Comprehensive or bundled fees. Some eligible educational institutions combine all of their fees for an academic

period into one amount. If you don’t receive or don’t have

access to an allocation showing how much you paid for

qualified education expenses and how much you paid for

personal expenses, such as those listed earlier, contact

the institution. The institution is generally required to make

this allocation and provide you with the amount you paid

for qualified education expenses on Form 1098-T. See

Figuring the Credit, later, for more information about Form

1098-T.

Who Is an Eligible Student?

To claim the American opportunity credit, the student for

whom you pay qualified education expenses must be an

eligible student. This is a student who meets all of the following requirements.

• The student didn’t have expenses that were used to

figure an American opportunity credit in any 4 earlier

tax years.

• The student hadn’t completed the first 4 years of post-

secondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2025.

• For at least one academic period beginning in 2025

(or the first 3 months of 2026 if the qualified expenses

were paid in 2025), the student was enrolled at least

half-time in a program leading to a degree, certificate,

or other recognized educational credential.

• The student hasn’t been convicted of any federal or

state felony for possessing or distributing a controlled

substance as of the end of 2025.

These requirements are also shown in Figure 2-2.

Completion of first 4 years. A student has completed

the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4

years of academic credit at that institution for coursework

completed by the student before 2025. This student generally wouldn’t be an eligible student for purposes of the

American opportunity credit.

Exception. Any academic credit awarded solely on the

basis of the student’s performance on proficiency examinations is disregarded in determining whether the student

has completed 4 years of postsecondary education.

Enrolled at least half-time. A student was enrolled at

least half-time if the student was taking at least half the

normal full-time workload for their course of study.

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Chapter 2

The standard for what is half of the normal full-time

workload is determined by each eligible educational institution. However, the standard may not be lower than any

of those established by the U.S. Department of Education

under the Higher Education Act of 1965.

Example 1. Mack graduated from high school in June

2024. In September, Mack enrolled in an undergraduate

degree program at College U and attended full-time for

both the 2024 fall and 2025 spring semesters. For the

2025 fall semester, Mack was enrolled less than half-time.

Because Mack was enrolled in an undergraduate degree

program on at least a half-time basis for at least one academic period that began in 2024 and at least one academic period that began in 2025, Mack is an eligible student for tax years 2024 and 2025 (including the 2025 fall

semester when Mack enrolled at College U on less than a

half-time basis).

Example 2. After taking classes at College V on a

part-time basis for a few years, Shelly became a full-time

student for the 2025 spring semester. College V classified

Shelly as a second-semester senior (fourth year) for the

2025 spring semester and as a first-semester graduate

student (fifth year) for the 2025 fall semester. Because

College V didn’t classify Shelly as having completed the

first 4 years of postsecondary education as of the beginning of 2025, Shelly is an eligible student for tax year

2025. Therefore, the qualified education expenses paid for

the 2025 spring semester and the 2025 fall semester are

taken into account in figuring the American opportunity

credit for 2025.

Example 3. During the 2024 fall semester, Larry was a

high school student who took classes on a half-time basis

at College X. Larry wasn’t enrolled as part of a degree

program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. Because Larry wasn’t enrolled in a

degree program at College X during 2024, Larry wasn’t an

eligible student for tax year 2024.

Example 4. The facts are the same as in Example 3.

During the 2025 spring semester, Larry again attended

College X but not as part of a degree program. Larry graduated from high school in June 2025. For the 2025 fall semester, Larry enrolled as a full-time student in College X

as part of a degree program, and College X awarded Larry

credit for the prior coursework at College X. Because

Larry was enrolled in a degree program at College X for

the 2025 fall term on at least a half-time basis, Larry is an

eligible student for all of tax year 2025. Therefore, the

qualified education expenses paid for classes taken at

College X during both the 2025 spring semester (during

which Larry wasn’t enrolled in a degree program) and the

2025 fall semester are taken into account in figuring any

American opportunity credit.

Example 5. Dee graduated from high school in June

2024. In January 2025, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a

certificate as a travel agent. Dee completed the program

American Opportunity Credit

Figure 2-2. Who Is an Eligible Student for the American Opportunity Credit?

This chart is provided to help you quickly decide whether a student is eligible for the American

opportunity credit. See the text for more details.

Did the student complete the first 4 years of

postsecondary education before the beginning of the

tax year?

Yes

Was the American opportunity credit claimed in at

least 4 prior tax years for this student?

Was the student enrolled at least half-time in a

program leading to a degree, certificate, or other

recognized educational credential for at least one

academic period beginning in 2025 (or the first

3 months of 2026 if the qualified expenses were

paid in 2025)?

Yes

Is the student free of any federal or state felony

conviction for possessing or distributing a controlled

substance as of the end of the tax year?

The student isn’t

an eligible student.

Yes

The student is

an eligible student.

in December 2025 and was awarded a certificate. In January 2026, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as

a computer programmer. Dee is an eligible student for

both tax years 2025 and 2026 because the degree requirement, the workload requirement, and the year of

study requirement for those years have been met.

Who Can Claim a

Dependent’s Expenses?

If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but

not both of you, can claim an American opportunity credit

for your dependent’s expenses for that year.

For you to claim an American opportunity credit for your

dependent’s expenses, you must also claim your dependent on your tax return. You do this by listing your

Chapter 2

American Opportunity Credit

Publication 970 (2025)

dependent’s name and other required information on Form

1040 or 1040-SR.

IF you...

THEN only...

claim on

your tax return a

dependent who is an

eligible student

you can claim the American

opportunity credit based on

that dependent’s expenses.

The dependent can’t claim

the credit.

don’t claim on your tax

return a dependent who is

an eligible student (even if

entitled to claim the

dependent)

the dependent can claim the

American opportunity credit.

You can’t claim the credit

based on this dependent’s

expenses.

Expenses paid by dependent. If you claim on your tax

return an eligible student who is your dependent, treat any

expenses paid (or deemed paid) by your dependent as if

you had paid them. Include these expenses when figuring

the amount of your American opportunity credit.

Qualified education expenses paid directly to an

TIP eligible educational institution for your dependent

under a court-approved divorce decree are treated as paid by your dependent.

Expenses paid by you. If you claim a dependent who is

an eligible student, only you can include any expenses

you paid when figuring the amount of the American opportunity credit. If neither you nor anyone else claims the dependent, only the dependent can include any expenses

you paid when figuring the American opportunity credit.

Expenses paid by others. Someone other than you,

your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible

educational institution to pay for an eligible student’s qualified education expenses. In this case, the student is treated as receiving the payment from the other person and, in

turn, paying the institution. If you claim the student as a

dependent on your tax return, you are considered to have

paid the expenses.

Example. In 2025, Todd’s grandparent makes a payment directly to an eligible educational institution for

Todd’s qualified education expenses. For purposes of

claiming an American opportunity credit, Todd is treated

as receiving the money from the grandparent and, in turn,

paying the qualified education expenses himself.

Unless Todd is claimed as a dependent on someone

else’s 2025 tax return, only Todd can use the payment to

claim an American opportunity credit.

If anyone, such as Todd’s parents, claims Todd on his

or her 2025 tax return, whoever claims Todd may be able

to use the expenses to claim an American opportunity

credit. If anyone else claims Todd, Todd can’t claim an

American opportunity credit.

Tuition reduction. When an eligible educational institution provides a reduction in tuition to an employee of the

Publication 970 (2025)

Chapter 2

institution (or spouse or dependent child of an employee),

the amount of the reduction may or may not be taxable. If

it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. For more information on tuition reductions, see Qualified Tuition

Reduction in chapter 1.

Figuring the Credit

The amount of the American opportunity credit (per eligible student) is the sum of:

1. 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and

2. 25% of the next $2,000 of qualified education expenses you paid for that student.

The maximum amount of American opportunity credit

you can claim in 2025 is $2,500 multiplied by the number

of eligible students. You can claim the full $2,500 for each

eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. However, the credit

may be reduced based on your MAGI. See Effect of the

Amount of Your Income on the Amount of Your Credit,

later.

Example. Jack and Kay are married and file a joint tax

return. For 2025, they claim their dependent child on their

tax return. Their MAGI is $70,000. Their child is in the junior (third) year of studies at the local university. Jack and

Kay paid qualified education expenses of $4,300 in 2025.

Jack and Kay, their child, and the local university meet

all of the requirements for the American opportunity credit.

Jack and Kay can claim a $2,500 American opportunity

credit in 2025. This is 100% of the first $2,000 of qualified

education expenses, plus 25% of the next $2,000.

Form 1098-T. To help you figure your American opportunity credit, the student may receive Form 1098-T. Generally, an eligible educational institution (such as a college or

university) must send Form 1098-T (or acceptable substitute) to each enrolled student by February 2, 2026 (January 31 falls on a Saturday). An institution will report payments received (box 1) for qualified education expenses.

However, the amount on Form 1098-T might be different

from what you paid. When figuring the credit, use only the

amounts you paid or are deemed to have paid in 2025 for

qualified education expenses.

In addition, Form 1098-T should give other information

for that institution, such as adjustments made for prior

years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at

least half-time or was a graduate student.

The eligible educational institution may ask for a completed Form W-9S, Request for Student’s or Borrower’s

Taxpayer Identification Number and Certification, or similar statement to obtain the student’s name, address, and

TIN.

American Opportunity Credit

To claim the American opportunity credit, you

must provide the educational institution’s EIN on

CAUTION your Form 8863. You should be able to obtain this

information from Form 1098-T or the educational institution.

Effect of the Amount of Your Income

on the Amount of Your Credit

The amount of your American opportunity credit is phased

out (gradually reduced) if your MAGI is between $80,000

and $90,000 ($160,000 and $180,000 if you file a joint return). You can’t claim an American opportunity credit if

your MAGI is $90,000 or more ($180,000 or more if you

file a joint return).

Modified adjusted gross income (MAGI). For most

taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.

MAGI when using Form 1040 or 1040-SR. If you file

Form 1040 or 1040-SR, your MAGI is the AGI on line 11a

of that form, modified by adding back any:

1. Foreign earned income exclusion,

2. Foreign housing exclusion,

3. Foreign housing deduction,

4. Exclusion of income by bona fide residents of American Samoa, and

5. Exclusion of income by bona fide residents of Puerto

Rico.

You can use Worksheet 2-1 to figure your MAGI.

Enter your adjusted gross income

(Form 1040 or 1040-SR, line 11a) . . . . . . . . .

Enter your foreign earned income

exclusion and/or housing exclusion

(Form 2555, line 45) . . . . . . . . . . .

Enter your foreign housing

deduction (Form 2555, line 50) . . . .

Enter the amount of income from

Puerto Rico you are excluding . . . .

Enter the amount of income from

American Samoa you are excluding

(Form 4563, line 15) . . . . . . . . . . .

Add the amounts on

lines 2, 3, 4, and 5 . . . . . . . . . . . . . . . . . . . .

Add the amounts on lines 1 and 6.

This is your modified adjusted gross

income. Enter here and

on Form 8863, line 3 . . . . . . . . . . . . . . . . . .

$2,500 ×

$180,000-$165,000

$20,000

= $1,875

Refundable Part of Credit

Forty percent of the American opportunity credit is refundable for most taxpayers. However, if you were under age

24 at the end of 2025 and the conditions listed below apply to you, you can’t claim any part of the American opportunity credit as a refundable credit on your tax return.

Instead, your allowed credit (figured on Form 8863, Part II)

will be used to reduce your tax as a nonrefundable credit

only.

1. You were:

a. Under age 18 at the end of 2025, or

b. Age 18 at the end of 2025 and your earned income (defined below) was less than one-half of

your support (defined below), or

c. Over age 18 and under age 24 at the end of 2025

and a full-time student (defined below) and your

earned income (defined below) was less than

one-half of your support (defined below).

2. At least one of your parents was alive at the end of

2025.

3. You are filing a return as single, head of household,

qualifying surviving spouse, or married filing separately for 2025.

Phaseout. If your MAGI is within the range of incomes

where the credit must be reduced, you will figure your re-

Example. You are filing a joint return and your MAGI is

$165,000. In 2025, you paid $5,000 of qualified education

expenses.

You figure a tentative American opportunity credit of

$2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses).

Because your MAGI is within the range of incomes

where the credit must be reduced, you must multiply your

tentative credit ($2,500) by a fraction. The numerator (top

part) of the fraction is $180,000 (the upper limit for those

filing a joint return) minus your MAGI. The denominator

(bottom part) is $20,000, the range of incomes for the

phaseout ($160,000 to $180,000). The result is the

amount of your phased out (reduced) American opportunity credit ($1,875).

You don’t qualify for a refund if items 1 (a, b, or c), 2,

and 3 below apply to you.

Worksheet 2-1. MAGI for the American

Opportunity Credit

duced credit using lines 2–7 of Form 8863. The same

method is shown in the following example.

Chapter 2

Earned income. Earned income includes wages, salaries, professional fees, and other payments received for

personal services actually performed. Earned income includes the part of any scholarship or fellowship grant that

represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship grant.

American Opportunity Credit

Publication 970 (2025)

Earned income doesn’t include that part of the compensation for personal services rendered to a corporation that

represents a distribution of earnings or profits rather than

a reasonable allowance as compensation for the personal

services actually rendered.

If you are a sole proprietor or a partner in a trade or

business in which both personal services and capital are

material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the

net profits from that trade or business (after subtracting

the deduction for one-half of self-employment tax). However, if capital isn’t an income-producing factor and your

personal services produced the business income, the

30% limit doesn’t apply.

Support. Your support includes food, shelter, clothing,

medical and dental care, education, and the like. Generally, the amount of the item of support will be the amount

of expenses incurred by the one furnishing such item. If

the item of support is in the form of property or lodging,

measure the amount of such item of support by its fair

market value. However, a scholarship received by you isn’t

considered support if you are a full-time student. See Pub.

501 for details.

Full-time student. You are a full-time student for 2025 if

during any part of any 5 calendar months during the year

you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time,

on-farm training course given by such an institution or by a

state, county, or local government agency.

Claiming the Credit

You claim the American opportunity credit by completing

Form 8863 and submitting it with your Form 1040 or

1040-SR. Enter the nonrefundable part of the credit on

Schedule 3 (Form 1040), line 3. Enter the refundable part

of the credit on Form 1040 or 1040-SR, line 29.

Lifetime Learning Credit

Reminders

Modified adjusted gross income (MAGI) limits. For

2025, the amount of your lifetime learning credit is gradually reduced (phased out) if your MAGI is between

$80,000 and $90,000 ($160,000 and $180,000 if you file a

joint return). You can’t claim the credit if your MAGI is

Chapter 3

Introduction

For 2025, there are two tax credits available to help you

offset the costs of higher education by reducing the

amount of your income tax. They are the American opportunity credit and the lifetime learning credit. This chapter

discusses the lifetime learning credit. The American opportunity credit is discussed in chapter 2.

This chapter explains:

Publication 970 (2025)

$90,000 or more ($180,000 or more if you file a joint return). For more information, see Figuring the Credit.

Form 1098-T requirement. To be eligible to claim the

lifetime learning credit, the law requires a taxpayer (or a

dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign.

However, you may claim the credit if the student doesn’t

receive a Form 1098-T because the student’s educational

institution isn’t required to furnish a Form 1098-T to the

student under existing rules (for example, if the student is

a qualified nonresident alien, has qualified education expenses paid entirely with scholarships, has qualified education expenses paid under a formal billing arrangement,

or is enrolled in courses for which no academic credit is

awarded). If a student’s educational institution isn’t required to provide a Form 1098-T to the student, you may

claim the credit without a Form 1098-T if you otherwise

qualify, can demonstrate that you (or a dependent) were

enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and related expenses.

You may also claim the credit if the student attended an

eligible educational institution required to furnish Form

1098-T but the student doesn’t receive Form 1098-T before you file your tax return (for example, if the institution is

otherwise required to furnish Form 1098-T and doesn’t

furnish it or refuses to do so) and you take the following required steps: After February 2, 2026 (January 31 falls on a

Saturday), but before you file your 2025 tax return, you or

the student must request that the educational institution

dependent) were enrolled at an eligible educational institution, and substantiate the payment of qualified tuition

and related expenses.

• Who can claim the lifetime learning credit,

• What expenses qualify for the credit,

• Who is an eligible student,

• Who can claim a dependent’s expenses,

• How to figure the credit,

• How to claim the credit, and

• When the credit must be repaid.

Lifetime Learning Credit

What is the tax benefit of the lifetime learning credit?

For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses

paid for all eligible students. There is no limit on the number of years the lifetime learning credit can be claimed for

each student.

A tax credit reduces the amount of income tax you may

have to pay. Unlike a deduction, which reduces the

amount of income subject to tax, a credit directly reduces

the tax itself. The lifetime learning credit is a nonrefundable credit. This means that it can reduce your tax to zero,

but if the credit is more than your tax, the excess won’t be

refunded to you.

Your allowable lifetime learning credit may be limited by

the amount of your income and the amount of your tax.

Can you claim more than one education credit this

year? For each student, you can elect for any year only

one of the credits. For example, if you elect to claim the

lifetime learning credit for a child on your 2025 tax return,

you can’t, for that same child, also claim the American opportunity credit for 2025.

If you are eligible to claim the lifetime learning credit

and you are also eligible to claim the American opportunity credit for the same student in the same year, you can

choose to claim either credit, but not both.

Who Can Claim the Credit?

Generally, you can claim the lifetime learning credit if all

three of the following requirements are met.

• You pay qualified education expenses of higher education.

• You pay the education expenses for an eligible student.

• The eligible student is either yourself, your spouse, or

a dependent you claim on your tax return.

Table 3-1.

Overview of the Lifetime

Learning Credit for 2025

Maximum credit

Up to $2,000 credit per return

Limit on modified adjusted

gross income (MAGI)

$180,000 if married filling jointly;

$90,000 if single, head of household,

or qualifying surviving spouse

Refundable or

nonrefundable

Nonrefundable—credit limited to the

amount of tax you must pay on your

taxable income

Number of years of

postsecondary education

Available for all years of

postsecondary education and for

courses to acquire or improve job skills

Number of tax years credit

available

Available for an unlimited number of

tax years

Type of program required

Student doesn’t need to be pursuing a

program leading to a degree or other

recognized education credential

Number of courses

Available for one or more courses

If you pay qualified education expenses for more than

one student in the same year, you can choose to claim

certain credits on a per-student, per-year basis. This

means that, for example, you can claim the American opportunity credit for one student and the lifetime learning

credit for another student in the same year.

Felony drug conviction

Felony drug convictions don’t make

the student ineligible

Qualified expenses

Tuition and fees required for

enrollment or attendance (including

amounts required to be paid to the

institution for course-related books,

supplies, and equipment)

Differences between the American opportunity and

lifetime learning credits. There are several differences

between these two credits. For example, you can claim

the American opportunity credit for the same student for

no more than 4 tax years. However, there is no limit on the

number of years for which you can claim a lifetime learning

credit based on the same student’s expenses. The differences between these credits are shown in the Appendix

near the end of this publication.

Payments for academic

periods

Payments made in 2025 for academic

periods beginning in 2025 or

beginning in the first 3 months of 2026

If you claim the American opportunity credit for

TIP any student, you can choose between using that

student’s adjusted qualified education expenses

for the American opportunity credit or the lifetime learning

credit. If you have the choice, the American opportunity

credit will always be greater than the lifetime learning

credit.

Overview of the lifetime learning credit for 2025. See

Table 3-1 for the basics of the credit. The details are discussed in this chapter.

Can You Claim the Credit?

Note: Qualified education expenses paid by a dependent you claim on your tax return, or by a third party for that

dependent, are considered paid by you.

“Qualified education expenses” are defined later under

Qualified Education Expenses. “Eligible students” are defined later under Who Is an Eligible Student. A dependent

you claim on your tax return is defined later under Who

Can Claim a Dependent’s Expenses.

You may find Figure 3-1 helpful in determining if you

can claim a lifetime learning credit on your tax return.

Who Can’t Claim the Credit?

The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return.

You can’t claim the lifetime learning credit for 2025 if any

of the following apply.

• Your filing status is married filing separately.

Chapter 3

Lifetime Learning Credit

Publication 970 (2025)

• You are listed as a dependent on another person’s tax

return (such as your parents’). See Who Can Claim a

Dependent’s Expenses, later.

• Your modified adjusted gross income (MAGI) is

$90,000 or more ($180,000 or more if filing married filing jointly). MAGI is explained later under Effect of the

Amount of Your Income on the Amount of Your Credit.

• You (or your spouse) were a nonresident alien for any

part of 2025 and the nonresident alien didn’t elect to

be treated as a resident alien for tax purposes. More

information on nonresident aliens can be found in Pub.

519.

• You claim the American opportunity credit (see chapter 2) for the same student in 2025.

What Expenses Qualify?

The lifetime learning credit is based on qualified education

expenses you pay for yourself, your spouse, or a dependent you claim on your tax return. Generally, the credit is allowed for qualified education expenses paid in 2025 for an

academic period beginning in 2025 or in the first 3 months

of 2026.

For example, if you paid $1,500 in December 2025 for

qualified tuition for the spring 2026 semester beginning in

January 2026, you may be able to use that $1,500 in figuring your 2025 credit.

Academic period. An academic period includes a semester, trimester, quarter, or other period of study (such

as a summer school session) as reasonably determined

by an educational institution. If an educational institution

uses credit hours or clock hours and doesn’t have academic terms, each payment period can be treated as an

academic period.

Paid with borrowed funds. You can claim a lifetime

learning credit for qualified education expenses paid with

the proceeds of a loan. You use the expenses to figure the

lifetime learning credit for the year in which the expenses

are paid, not the year in which the loan is repaid. Treat

loan disbursements sent directly to the educational institution as paid on the date the institution credits the student’s

account.

Student withdraws from class(es). You can claim a

lifetime learning credit for qualified education expenses

not refunded when a student withdraws.

Qualified Education Expenses

For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses

required for enrollment in a course at an eligible educational institution. The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills.

Publication 970 (2025)

Chapter 3

Eligible educational institution. An eligible educational

institution is any college, university, vocational school, or

other postsecondary educational institution eligible to participate in a student aid program administered by the U.S.

Department of Education. Virtually all accredited public,

nonprofit, and proprietary (privately owned profit-making)

postsecondary institutions meet this definition.

An eligible educational institution also includes certain

educational institutions located outside the United States

that are eligible to participate in a student aid program administered by the U.S. Department of Education.

The educational institution should be able to tell

TIP you if it is an eligible educational institution.

Related expenses. Student activity fees and expenses

for course-related books, supplies, and equipment are included in qualified education expenses only if the fees

and expenses must be paid to the institution for enrollment

or attendance.

Prepaid expenses. Qualified education expenses paid

in 2025 for an academic period that begins in the first 3

months of 2026 can be used in figuring an education

credit for 2025 only. See Academic period, earlier. For example, if you pay $2,000 in December 2025 for qualified

tuition for the 2026 winter quarter that begins in January

2026, you can use that $2,000 in figuring an education

credit for 2025 only (if you meet all the other requirements).

You can’t use any amount you paid in 2024 or

2026 to figure the qualified education expenses

CAUTION you use to figure your 2025 education credit(s).

In the following examples, assume that each student is

an eligible student at an eligible educational institution.

Example 1. Jackson is a sophomore in University V’s

degree program in dentistry. This year, in addition to tuition, Jackson is required to pay a fee to the university for

the rental of the dental equipment that will be used in this

program. Because the equipment rental fee must be paid

to University V for enrollment and attendance, the equipment rental fee is a qualified expense.

Example 2. Donna and Charles, both first-year students at College W, are required to have certain books

and other reading materials to use in their mandatory

first-year classes. The college has no policy about how

students should obtain these materials, but any student

who purchases them from College W’s bookstore will receive a bill directly from the college. Charles bought the

books from a friend, so what was paid for them isn’t a

qualified education expense. Donna bought the books at

College W’s bookstore. Although Donna paid College W

directly for the first-year books and materials, the payment

isn’t a qualified expense because the books and materials

aren’t required to be purchased from College W for enrollment or attendance at the institution.

Example 3. When Marci enrolled at College X for

freshman year, a separate student activity fee in addition

Lifetime Learning Credit

to tuition had to be paid. This activity fee is required of all

students, and is used solely to fund on-campus organizations and activities run by students, such as the student

newspaper and student government. No portion of the fee

covers personal expenses. Although labeled as a student

activity fee, the fee is required for Marci’s enrollment and

attendance at College X. Therefore, it is a qualified expense.

No Double Benefit Allowed

• The tax-free part of scholarships and fellowship grants

(see Tax-Free Scholarships and Fellowship Grants in

chapter 1);

• The tax-free part of Pell grants (see Pell Grants and

Other Title IV Need-Based Education Grants in chapter 1);

• Employer-provided educational assistance (see chap-

You can’t do any of the following.

• Deduct higher education expenses on your income

tax return (as, for example, a business expense) and

also claim a lifetime learning credit based on those

same expenses.

• Claim a lifetime learning credit for any student and use

any of that student’s expenses in figuring your American opportunity credit.

• Claim a lifetime learning credit based on the same ex-

penses used to figure the tax-free portion of a distribution from a Coverdell education savings account

(ESA) or qualified tuition program (QTP). See Coordination With American Opportunity and Lifetime Learning Credits in chapter 6 and Coordination With American Opportunity and Lifetime Learning Credits in

chapter 7.

• Claim a credit based on qualified education expenses

paid with tax-free educational assistance, such as a

scholarship, grant, or assistance provided by an employer. See Adjustments to Qualified Education Expenses next.

Adjustments to Qualified Education

Expenses

For each student, reduce the qualified education expenses paid by or on behalf of that student under the following

rules. The result is the amount of adjusted qualified education expenses for each student.

Tax-free educational assistance. For tax-free educational assistance received in 2025, reduce the qualified

education expenses for each academic period by the

amount of tax-free educational assistance allocable to that

academic period. See Academic period, earlier.

Some tax-free educational assistance received after

2025 may be treated as a refund of qualified education expenses paid in 2025. This tax-free educational assistance

is any tax-free educational assistance received by you or

anyone else after 2025 for qualified education expenses

paid on behalf of a student in 2025 (or attributable to enrollment at an eligible educational institution during 2025).

If this tax-free educational assistance is received after

2025 but before you file your 2025 income tax return, see

Refunds received after 2025 but before your income tax

return is filed, later. If this tax-free educational assistance

is received after 2025 and after you file your 2025 income

tax return, see Refunds received after 2025 and after your

income tax return is filed, later.

Tax-free educational assistance includes:

Chapter 3

ter 10);

• Veterans’ educational assistance (see Veterans’ Benefits in chapter 1); and

• Any other nontaxable (tax-free) payments (other than

gifts or inheritances) received as educational assistance.

Generally, any scholarship or fellowship grant is treated

as tax free. However, a scholarship or fellowship grant isn’t

treated as tax free to the extent the student includes it in

gross income (the student may or may not be required to

file a tax return for the year the scholarship or fellowship

grant is received) and either of the following is true.

• The scholarship or fellowship grant (or any part of it)

must be applied (by its terms) to expenses (such as

room and board) other than qualified education expenses as defined in Qualified education expenses in

chapter 1.

• The scholarship or fellowship grant (or any part of it)

may be applied (by its terms) to expenses (such as

room and board) other than qualified education expenses as defined in Qualified education expenses in

chapter 1.

A student can’t choose to include in income a

scholarship or fellowship grant provided by an InCAUTION dian tribal government that is excluded from income under the Tribal General Welfare Exclusion Act of

2014 or benefits provided by an educational program described in Revenue Procedure 2014-35, section 5.02(2)(b)

(ii), available at IRS.gov/irb/2014-26_IRB#RP-2014-35.

You may be able to increase the combined value

TIP of an education credit if the student includes

some or all of a scholarship or fellowship grant in

income in the year it is received. For examples, see Coordination with Pell grants and other scholarships, later.

Refunds. A refund of qualified education expenses may

reduce adjusted qualified education expenses for the tax

year or require repayment (recapture) of a credit claimed

in an earlier year. Some tax-free educational assistance

received after 2025 may be treated as a refund. See

Tax-free educational assistance, earlier.

Refunds received in 2025. For each student, figure

the adjusted qualified education expenses for 2025 by

adding all the qualified education expenses for 2025 and

subtracting any refunds of those expenses received from

the eligible educational institution during 2025.

Lifetime Learning Credit

Publication 970 (2025)

Figure 3-1. Can You Claim the Lifetime Learning Credit for 2025?

Did you pay qualified education expenses in 2025 for an eligible student?*

Yes

Did the academic period for which you paid qualified education

expenses begin in 2025 or the first 3 months of 2026?

Yes

Is the eligible student you, your spouse (if married filing jointly), or your

dependent you claim on your tax return?

Yes

Are you listed as a dependent on another person’s tax return?

Yes

Is your filing status married filing separately?

For any part of 2025, were you (or your spouse) a nonresident alien who

didn’t elect to be treated as a resident alien for tax purposes?

Yes

Is your modified adjusted gross income (MAGI) less than $90,000

($180,000 if married filing jointly)?

Yes

Do you have a tax liability (Form 1040 or 1040-SR, line 18, minus

Schedule 3 (Form 1040), lines 1, 2, 6d, and 6l)?

Yes

Are you claiming an American opportunity credit for the same student?

Yes

Did you use the same expenses to claim a deduction or credit?

Yes

Were the same expenses paid with a tax-free scholarship, grant, or

employer-provided educational assistance?

Did you, or someone else, receive a refund of all the expenses?

Yes

You can’t

claim the lifetime

learning credit for

2025.

You can claim

the lifetime

learning credit

for 2025.**

* Qualified education expenses paid by a dependent you claim on your tax return, or by a third party for that dependent, are considered paid by

you.

**Your education credits may be limited to your tax liability minus certain credits. See Form 8863 for more details.

Publication 970 (2025)

Chapter 3

Lifetime Learning Credit

Refunds received after 2025 but before your income tax return is filed. If anyone receives a refund after 2025 of qualified education expenses paid on behalf of

a student in 2025 and the refund is paid before you file an

income tax return for 2025, the amount of qualified education expenses for 2025 is reduced by the amount of the refund.

Refunds received after 2025 and after your income

tax return is filed. If anyone receives a refund after 2025

of qualified education expenses paid on behalf of a student in 2025 and the refund is paid after you file an income tax return for 2025, you may need to repay some or

all of the credit. See Credit recapture next.

Credit recapture. If any tax-free educational assistance

for the qualified education expenses paid in 2025 or any

refund of your qualified education expenses paid in 2025

is received after you file your 2025 income tax return, you

must recapture (repay) any excess credit. You do this by

refiguring the amount of your adjusted qualified education

expenses for 2025 by reducing the expenses by the

amount of the refund or tax-free educational assistance.

You then refigure your education credit(s) for 2025 and figure the amount by which your 2025 tax liability would have

increased if you had claimed the refigured credit(s). Include that amount as an additional tax for the year the refund or tax-free assistance was received.

Example. You pay $9,300 in tuition and fees in December 2025, and your child began college in January

2026. You filed your 2025 tax return on February 14, 2026,

and claimed a lifetime learning credit of $1,860. You

claimed no other tax credits. After you filed your return,

your child withdrew from two courses and you received a

refund of $2,900. You must refigure your 2025 lifetime

learning credit using $6,400 of qualified education expenses instead of $9,300. The refigured credit is $1,280 and

your tax liability increased by $580. See the instructions

for your 2026 income tax return to determine where to include this tax.

If you pay qualified education expenses in both

TIP 2025 and 2026 for an academic period that be-

gins in the first 3 months of 2026 and you receive

tax-free educational assistance, or a refund, as described

above, you may choose to reduce your qualified education

expenses for 2026 instead of reducing your expenses for

2025.

Amounts that don’t reduce qualified education expenses. Don’t reduce qualified education expenses by

amounts paid with funds the student receives as:

• Payment for services, such as wages;

• A loan;

• A gift;

• An inheritance; or

• A withdrawal from the student’s personal savings.

Chapter 3

Don’t reduce the qualified education expenses by any

scholarship or fellowship grant reported as income on the

student’s tax return in the following situations.

• The use of the money is restricted, by the terms of the

scholarship or fellowship grant, to costs of attendance

(such as room and board) other than qualified education expenses, as defined in Qualified education expenses in chapter 1.

• The use of the money isn’t restricted.

For examples, see Adjustments to Qualified Education Expenses in chapter 2.

Coordination with Pell grants and other scholarships.

You may be able to increase your lifetime learning credit

when the student (you, your spouse, or your dependent)

includes certain scholarships or fellowship grants in the

student’s gross income. Your credit may increase only if

the amount of the student’s qualified education expenses

minus the total amount of scholarships and fellowship

grants is less than $10,000. If this situation applies, consider including some or all of the scholarship or fellowship

grant in the student’s income in order to treat the included

amount as paying nonqualified expenses instead of qualified education expenses. Nonqualified expenses are expenses such as room and board that aren’t qualified education expenses such as tuition and related fees.

Scholarships and fellowship grants that the student includes in income don’t reduce the student’s qualified education expenses available to figure your lifetime learning

credit. Thus, including enough of the scholarship or fellowship grant in the student’s income to report up to $10,000

in qualified education expenses for your lifetime learning

credit may increase the credit by enough to increase your

tax refund or reduce the amount of tax you owe even considering any increased tax liability from the additional income. However, the increase in tax liability as well as the

loss of other tax credits may be greater than the additional

lifetime learning credit and may cause your tax refund to

decrease or the amount of tax you owe to increase. Your

specific circumstances will determine what amount, if any,

of the scholarship or fellowship grant to include in income

to maximize your tax refund or minimize the amount of tax

you owe.

The scholarship or fellowship grant must be one that

may qualify as a tax-free scholarship under the rules discussed in chapter 1. Also, the scholarship or fellowship

grant must be one that may (by its terms) be used for nonqualified expenses. Finally, the amount of the scholarship

or fellowship grant that is applied to nonqualified expenses can’t exceed the amount of the student’s actual nonqualified expenses that are paid in the tax year. This

amount may differ from the student’s living expenses estimated by the student’s school in figuring the official cost of

attendance under student aid rules.

The fact that the educational institution applies the

scholarship or fellowship grant to qualified education expenses, such as tuition and related fees, doesn’t prevent

the student from choosing to apply certain scholarships or

fellowship grants to the student’s actual nonqualified expenses. By making this choice (that is, by including the

Lifetime Learning Credit

Publication 970 (2025)

part of the scholarship or fellowship grant applied to the

student’s nonqualified expenses in income), the student

may increase taxable income and may be required to file a

tax return. But this allows payments made in cash, by

check, by credit or debit card, or with borrowed funds such

as a student loan to be applied to qualified education expenses.

Example 1—no scholarship. Judy, who is unmarried,

is taking courses at a public community college to be recertified to teach in public schools. The adjusted gross income (AGI) and the MAGI, for purposes of the credit, are

$30,600. Judy claims the standard deduction of $15,750,

resulting in taxable income of $14,850 and a tax liability

before credits of $1,547. Judy claims no credits other than

the lifetime learning credit. In July 2025, Judy paid $700

for the summer 2025 semester; in August 2025, Judy paid

$1,900 for the fall 2025 semester; and in December 2025,

Judy paid another $1,900 for the spring semester beginning in January 2026. Judy and the college meet all requirements for the lifetime learning credit. All of the $4,500

tuition paid in 2025 can be used when figuring the 2025

lifetime learning credit. Judy claims a $900 lifetime learning credit and the tax liability after credits is $647.

Example 2—scholarship excluded from income.

The facts are the same as in Example 1, except that Judy

was awarded a $1,500 scholarship. Under the terms of the

scholarship, it may be used to pay any education expenses, including room and board. If the scholarship is excluded from income, Judy will be deemed (for purposes of

figuring the education credit) to have applied the scholarship to pay for tuition, required fees, and course materials.

Only $3,000 of the $4,500 tuition paid in 2025 could be

used when figuring the 2025 lifetime learning credit. The

lifetime learning credit would be reduced to $600 and the

tax liability after credits would be $947.

Example 3—scholarship included in income. The

facts are the same as in Example 2. If, unlike Example 2,

Judy includes the $1,500 scholarship in income, Judy will

be deemed to have applied the entire scholarship to pay

for room and board. Judy’s AGI and MAGI would increase

to $32,100, the taxable income would be $16,350, and the

tax liability before credits would be $1,727. Judy would be

able to use the $4,500 of adjusted qualified education expenses to figure the credit. Judy could claim a $900 lifetime learning credit and the tax liability after credits would

be $827.

Example 4—scholarship applied by the postsecondary school to tuition. The facts are the same as in

Example 3, except the $1,500 scholarship is paid directly

to the public community college. The fact that the public

community college applies the scholarship to Judy’s tuition and related fees doesn’t prevent Judy from including

the $1,500 scholarship in income. As in Example 3, by doing so, Judy will be deemed to have applied the entire

scholarship to pay for room and board. Judy could claim

the $900 lifetime learning credit and the tax liability after

credits would be $827.

Publication 970 (2025)

Chapter 3

Note: Whether you will benefit from applying a scholarship or fellowship grant to nonqualified expenses will depend on the amount of the student’s qualified education

expenses, the amount of the scholarship or fellowship

grant, and whether the scholarship or fellowship grant may

(by its terms) be used for nonqualified expenses. Any benefit will also depend on the student’s federal and state

marginal tax rates as well as any federal and state tax

credits the student claims. Before deciding, look at the total amount of your federal and state tax refunds or taxes

owed and, if the student is your dependent, the student’s

tax refunds or taxes owed. For example, if you are the student and you also claim the earned income credit, choosing to apply a scholarship or fellowship grant to nonqualified expenses by including the amount in your income

may not benefit you if the decrease to your earned income

credit as a result of including the scholarship or fellowship

grant in income is more than the increase to your lifetime

learning credit as a result of including this amount in income.

Expenses That Don’t Qualify

Qualified education expenses don’t include amounts paid

for:

• Insurance;

• Medical expenses (including student health fees);

• Room and board;

• Transportation; or

• Similar personal, living, or family expenses.

This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.

Sports, games, hobbies, and noncredit courses.

Qualified education expenses generally don’t include expenses that relate to any course of instruction or other education that involves sports, games, or hobbies, or any

noncredit course. However, if the course of instruction or

other education is part of the student’s degree program or

is taken by the student to acquire or improve job skills,

these expenses can qualify.

Comprehensive or bundled fees. Some eligible educational institutions combine all of their fees for an academic

period into one amount. If you don’t receive or don’t have

access to an allocation showing how much you paid for

qualified education expenses and how much you paid for

personal expenses, such as those listed above, contact

the institution. The institution is generally required to make

this allocation and provide you with the amount you paid

for qualified education expenses on Form 1098-T. See

Figuring the Credit, later, for more information about Form

1098-T.

Who Is an Eligible Student?

For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at

Lifetime Learning Credit

an eligible educational institution (as defined under Qualified Education Expenses, earlier).

Who Can Claim a

Dependent’s Expenses?

If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but

not both of you, can claim a lifetime learning credit for your

dependent’s expenses for that year.

For you to claim a lifetime learning credit for your dependent’s expenses, you must also claim your dependent

on your tax return. You do this by listing your dependent’s

name and other required information on Form 1040 or

1040-SR.

IF you...

THEN only...

claim on your tax return a

dependent who is an

eligible student

you can claim the lifetime

learning credit based on

that dependent’s expenses.

The dependent can’t claim

the credit.

don’t claim on your tax

return a dependent who is

an eligible student (even if

entitled to claim the

dependent)

the dependent can claim the

lifetime learning credit. You

can’t claim the credit based

on this dependent’s

expenses.

Expenses paid by dependent. If you claim on your tax

return an eligible student who is your dependent, treat any

expenses paid (or deemed paid) by your dependent as if

you had paid them. Include these expenses when figuring

the amount of your lifetime learning credit.

Qualified education expenses paid directly to an

TIP eligible educational institution for your dependent

under a court-approved divorce decree are treated as paid by your dependent.

Expenses paid by you. If you claim a dependent who is

an eligible student, only you can include any expenses

you paid when figuring the amount of the lifetime learning

credit. If neither you nor anyone else claims the dependent, only the dependent can include any expenses you

paid when figuring the lifetime learning credit.

Expenses paid by others. Someone other than you,

your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible

educational institution to pay for an eligible student’s qualified education expenses. In this case, the student is treated as receiving the payment from the other person and, in

turn, paying the institution. If you claim the student as a

dependent on your tax return, you are considered to have

paid the expenses.

Chapter 3

Example. In 2025, Todd’s grandparent makes a payment directly to an eligible educational institution for

Todd’s qualified education expenses. For purposes of

claiming a lifetime learning credit, Todd is treated as receiving the money from the grandparent and, in turn, paying the qualified education expenses.

Unless Todd is claimed as a dependent on someone

else’s 2025 tax return, only Todd can use the payment to

claim a lifetime learning credit.

If anyone, such as Todd’s parents, claims Todd on his

or her 2025 tax return, whoever claims Todd may be able

to use the expenses to claim a lifetime learning credit. If

anyone else claims Todd, Todd can’t claim a lifetime learning credit.

Tuition reduction. When an eligible educational institution provides a reduction in tuition to an employee of the

institution (or spouse or dependent child of an employee),

the amount of the reduction may or may not be taxable. If

Reduction in chapter 1.

Figuring the Credit

The amount of the lifetime learning credit is 20% of the

first $10,000 of qualified education expenses you paid for

all eligible students. The maximum amount of lifetime

learning credit you can claim for 2025 is $2,000 (20% ×

$10,000). However, that amount may be reduced based

on your MAGI. See Effect of the Amount of Your Income

on the Amount of Your Credit, later.

Example. Bruce and Toni are married and file a joint

tax return. For 2025, their MAGI is $75,000. Toni is attending a local college (an eligible educational institution) to

earn credits toward a degree in nursing. Toni already has

a bachelor’s degree in history and wants to become a

nurse. In August 2025, Toni paid $5,000 of qualified education expenses for the fall 2025 semester. Bruce and

Toni can claim a $1,000 (20% × $5,000) lifetime learning

credit on their 2025 joint tax return.

Form 1098-T. To help you figure your lifetime learning

credit, the student may receive Form 1098-T. Generally, an

eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to

each enrolled student by February 2, 2026 (January 31

falls on a Saturday). An institution will report payments received (box 1) for qualified education expenses. However,

the amount on Form 1098-T might be different from what

you paid. When figuring the credit, use only the amounts

you paid or are deemed to have paid in 2025 for qualified

education expenses.

In addition, Form 1098-T should give other information

for that institution, such as adjustments made for prior

Lifetime Learning Credit

Publication 970 (2025)

years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at

least half-time or was a graduate student.

The eligible educational institution may ask for a completed Form W-9S or similar statement to obtain the student’s name, address, and taxpayer identification number.

Effect of the Amount of Your Income

on the Amount of Your Credit

The amount of your lifetime learning credit is phased out

(gradually reduced) if your MAGI is between $80,000 and

$90,000 ($160,000 and $180,000 if you file a joint return).

You can’t claim a lifetime learning credit if your MAGI is

$90,000 or more ($180,000 or more if you file a joint return).

Modified adjusted gross income (MAGI). For most

taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.

MAGI when using Form 1040 or 1040-SR. If you file

Form 1040 or 1040-SR, your MAGI is the AGI on line 11a

of that form, modified by adding back any:

1. Foreign earned income exclusion,

2. Foreign housing exclusion,

3. Foreign housing deduction,

4. Exclusion of income by bona fide residents of American Samoa, and

5. Exclusion of income by bona fide residents of Puerto

Rico.

You can use Worksheet 3-1 to figure your MAGI.

Worksheet 3-1. MAGI for the Lifetime

Learning Credit

1. Enter your adjusted gross income

(Form 1040 or 1040-SR, line 11a) . . . . . .

2. Enter your foreign earned

income exclusion and/or

housing exclusion (Form

2555, line 45) . . . . . . . . . .

3. Enter your foreign housing

deduction (Form 2555,

line 50) . . . . . . . . . . . . . . .

4. Enter the amount of

income from Puerto Rico

you’re excluding . . . . . . . .

5. Enter the amount of

income from American

Samoa you’re excluding

(Form 4563,

line 15) . . . . . . . . . . . . . . .

6. Add the amounts on

lines 2, 3, 4, and 5 . . . . . . . . . . . . . . . . . .

7. Add the amounts on lines 1 and 6.

This is your modified adjusted gross

income. Enter this amount

on Form 8863, line 14 . . . . . . . . . . . . . . .

Phaseout. If your MAGI is within the range of incomes

where the credit must be reduced, you will figure your reduced credit using lines 10–18 of Form 8863. The same

method is shown in the following example.

Example. You are filing a joint return with a MAGI of

$161,000. In 2025, you paid $6,600 of qualified education

expenses.

You figure the tentative lifetime learning credit (20% of

the first $10,000 of qualified education expenses you paid

for all eligible students). The result is a $1,320 (20% x

$6,600) tentative credit.

Because your MAGI is within the range of incomes

where the credit must be reduced, you must multiply your

tentative credit ($1,320) by a fraction. The numerator (top

part) of the fraction is $180,000 (the upper limit for those

filing a joint return) minus your MAGI. The denominator

(bottom part) is $20,000, the range of incomes for the

phaseout ($160,000 to $180,000). The result is the

amount of your phased-out (reduced) lifetime learning

credit ($1,254).

$1,320

$180,000 - $161,000

$20,000

$1,254

Claiming the Credit

You claim the lifetime learning credit by completing Form

8863 and submitting it with your Form 1040 or 1040-SR.

Enter the credit on Schedule 3 (Form 1040), line 3.

Publication 970 (2025)

Chapter 3

Lifetime Learning Credit

Table 4-1. Student Loan Interest Deduction

at a Glance

This table summarizes the features of the

student loan interest deduction.

Don’t rely on this table alone. Refer to the

text for more details.

Student Loan Interest

Deduction

What’s New

Modified adjusted gross income (MAGI) limits. For

2025, the amount of your student loan interest deduction

is gradually reduced (phased out) if your MAGI is between

$85,000 and $100,000 ($170,00 and $200,000 if you file a

joint return). You can’t claim the deduction if your MAGI is

$100,000 or more ($200,000 or more if you file a joint return). For more information, see Figuring the Deduction.

Reminder

No double benefit allowed. You can’t deduct as interest

on a student loan any interest paid by your employer after

March 27, 2020, under an educational assistance program. See No Double Benefit Allowed.

Introduction

Generally, personal interest you pay, other than certain

mortgage interest, isn’t deductible on your tax return.

However, if your MAGI is less than $100,000 ($200,000 if

filing a joint return), you may be allowed a special deduction for paying interest on a student loan (also known as

an education loan) used for higher education. For most

taxpayers, MAGI is the adjusted gross income (AGI) as

figured on their federal income tax return before subtracting any deduction for student loan interest. This deduction

can reduce the amount of your income subject to tax by

up to $2,500.

The student loan interest deduction is claimed as an

adjustment to income. This means you can claim this deduction even if you don’t itemize deductions on Schedule A (Form 1040).

This chapter explains:

• What type of loan interest you can deduct,

• Whether you can claim the deduction,

• What expenses you must have paid with the student

loan,

Feature

Description

Maximum benefit

You can reduce your income subject to tax

by up to $2,500.

Loan qualifications

Your student loan:

• Must have been taken out solely to pay

qualified education expenses, and

• Can’t be from a related person or made

under a qualified employer plan.

Student qualifications

The student must be:

• You, your spouse, or your dependent (as

defined later for this purpose); and

• Enrolled at least half-time in a program

leading to a degree, certificate, or other

recognized educational credential at an

eligible educational institution.

Limit on MAGI

$200,000 if married filing a joint return;

$100,000 if single, head of household, or

qualifying surviving spouse.

Student Loan Interest Defined

Student loan interest is interest you paid during the year

on a qualified student loan. It includes both required and

voluntary interest payments.

Qualified Student Loan

This is a loan you took out solely to pay qualified education expenses (defined later) that were:

• For you, your spouse, or a person who was your de-

pendent (as defined later for this purpose) when you

took out the loan;

• Paid or incurred within a reasonable period of time before or after you took out the loan; and

• For education provided during an academic period for

an eligible student.

Loans from the following sources aren’t qualified student loans.

• A related person.

• A qualified employer plan.

Your dependent. Generally, your dependent is someone

who is either a:

• Who is an eligible student,

• How to figure the deduction, and

• How to claim the deduction.

• Qualifying child, or

• Qualifying relative.

You can find more information about dependents in Pub.

501.

Chapter 4

Student Loan Interest Deduction

Publication 970 (2025)

For this purpose, the term “dependent” also includes

any person you could have claimed as a dependent on

your return except that:

• You or your spouse if filing jointly could be claimed as

a dependent of another taxpayer (like on your parent’s

tax return);

• The person filed a joint return; or

• The person had gross income for the year that was

equal to or more than $5,200 (for 2025).

Reasonable period of time. Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are

paid with the proceeds of student loans that are part of a

federal postsecondary education loan program.

Even if not paid with the proceeds of that type of loan,

the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met.

• The expenses relate to a specific academic period.

• The loan proceeds are disbursed within a period that

begins 90 days before the start of that academic period and ends 90 days after the end of that academic

period.

If neither of the above situations applies, the reasonable period of time is usually determined based on all the

relevant facts and circumstances.

Academic period. An academic period includes a semester, trimester, quarter, or other period of study (such

as a summer school session) as reasonably determined

by an educational institution. If an educational institution

uses credit hours or clock hours and doesn’t have academic terms, each payment period can be treated as an

academic period.

Eligible student. An eligible student is a student who

was enrolled at least half-time in a program leading to a

degree, certificate, or other recognized educational credential.

Enrolled at least half-time. A student was enrolled at

least half-time if the student was taking at least half the

normal full-time workload for their course of study.

The standard for what is half of the normal full-time

workload is determined by each eligible educational institution. However, the standard may not be lower than any

of those established by the U.S. Department of Education

under the Higher Education Act of 1965.

Related person. You can’t deduct interest on a loan you

get from a related person. Related persons include:

• Your spouse;

• Your brothers and sisters;

• Your half brothers and half sisters;

• Your ancestors (parents, grandparents, etc.);

• Your lineal descendants (children, grandchildren,

• Certain corporations, partnerships, trusts, and exempt

organizations.

Qualified employer plan. You can’t deduct interest on a

loan made under a qualified employer plan or under a

contract purchased under such a plan.

Qualified Education Expenses

For purposes of the student loan interest deduction, these

expenses are the total costs of attending an eligible educational institution. They include amounts paid for the following items.

• Tuition and fees.

• Room and board.

• Books, supplies, and equipment.

• Other necessary expenses (such as transportation).

The cost of room and board qualifies only to the extent

it isn’t more than:

• The allowance for room and board, as determined by

the eligible educational institution, that was included in

the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student; or

• If greater, the actual amount charged if the student is

residing in housing owned or operated by the eligible

educational institution.

Eligible educational institution. An eligible educational

institution is generally any college, university, vocational

school, or other postsecondary educational institution eligible to participate in a student aid program administered

by the U.S. Department of Education. Virtually all accredited public, nonprofit, and proprietary (privately owned

profit-making) postsecondary institutions meet this definition.

An eligible educational institution also includes certain

educational institutions located outside the United States

that are eligible to participate in a student aid program administered by the U.S. Department of Education.

For purposes of the student loan interest deduction, an

eligible educational institution also includes an institution

conducting an internship or residency program leading to

a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training.

An educational institution must meet the above criteria

only during the academic period(s) for which the student

loan was incurred. The deductibility of interest on the loan

isn’t affected by the institution’s subsequent loss of eligibility.

The educational institution should be able to tell

TIP you if it is an eligible educational institution.

etc.); and

Publication 970 (2025)

Chapter 4

Student Loan Interest Deduction

Adjustments to Qualified Education

Expenses

You must reduce your qualified education expenses by the

total amount paid for them with the following tax-free

items.

• Employer-provided educational assistance. See chapter 10.

• Tax-free distribution of earnings from a Coverdell education savings account (ESA). See Tax-Free Distributions in chapter 6.

• Tax-free distribution of earnings from a qualified tuition

program (QTP). See Figuring the Taxable Portion of a

Distribution in chapter 7.

• U.S. savings bond interest that you exclude from in-

come because it is used to pay qualified education expenses. See chapter 9.

• The tax-free part of scholarships and fellowship

grants. See Tax-Free Scholarships and Fellowship

Grants in chapter 1.

• Veterans’ educational assistance. See Veterans' Benefits in chapter 1.

• Any other nontaxable (tax-free) payments (other than

gifts or inheritances) received as educational assistance.

Include as Interest

In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be

student loan interest.

Loan origination fee. In general, this is a one-time fee

charged by the lender when a loan is made. To be deductible as interest, a loan origination fee must be for the use

of money rather than for property or services (such as

commitment fees or processing costs) provided by the

lender. A loan origination fee treated as interest accrues

over the life of the loan.

Loan origination fees weren’t required to be reported on

Form 1098-E, Student Loan Interest Statement, for loans

made before September 1, 2004. If loan origination fees

aren’t included in the amount reported on your Form

1098-E, you can use any reasonable method to allocate

the loan origination fees over the term of the loan.

Capitalized interest. This is unpaid interest on a student

loan that is added by the lender to the outstanding principal balance of the loan. Capitalized interest is treated as

interest for tax purposes and is deductible as payments of

principal are made on the loan. No deduction for capitalized interest is allowed in a year in which no loan payments were made.

Interest on revolving lines of credit. This interest,

which includes interest on credit card debt, is student loan

interest if the borrower uses the line of credit (credit card)

only to pay qualified education expenses. See Qualified

Education Expenses, earlier.

Chapter 4

Interest on refinanced and consolidated student

loans. This includes interest on a loan used solely to refinance a qualified student loan of the same borrower. It

also includes a single consolidation loan used solely to refinance two or more qualified student loans of the same

borrower.

If you refinance a qualified student loan for more

than your original loan and you use the additional

CAUTION amount for any purpose other than qualified education expenses, you can’t deduct any interest paid on the

refinanced loan.

Allocating Payments Between Interest and

Principal

The allocation of payments between interest and principal

for tax purposes might not be the same as the allocation

shown on the Form 1098-E or other statement you receive

from the lender or loan servicer. To make the allocation for

tax purposes, a payment generally applies first to stated

interest that remains unpaid as of the date the payment is

due, second to any loan origination fees allocable to the

payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the

outstanding principal.

Example. In August 2024, you took out a $10,000 student loan to pay the tuition for your senior year of college.

The lender charged a 3% loan origination fee ($300) that

was withheld from the funds you received. The interest

(5% simple) on this loan accrued while you completed

your senior year and for 6 months after graduating. At the

end of that period, the lender determined the amount to be

repaid by capitalizing all accrued but unpaid interest ($625

interest accrued from August 2024 through October 2025)

and adding it to the outstanding principal balance of the

loan. The loan is payable over 60 months, with a payment

of $200.51 due on the first of each month, beginning November 2025.

You didn’t receive a Form 1098-E for 2025 from the

lender because the amount of interest you paid didn’t require the lender to issue an information return. However,

you did receive an account statement from the lender that

showed the following 2025 payments on your outstanding

loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest).

Payment Date

Payment

Stated Interest

Principal

November 2025

December 2025

$200.51

$44.27

$43.62

$156.24

$156.89

Totals

$401.02

$87.89

$313.13

To determine the amount of interest that could be deducted on the loan for 2025, you start with the total

amount of stated interest you paid, $87.89. Next, allocate

the loan origination fee over the term of the loan ($300 ÷

60 months = $5 per month). A total of $10 ($5 of each of

the two principal payments) should be treated as interest

for tax purposes. You then apply the unpaid capitalized

Student Loan Interest Deduction

Publication 970 (2025)

interest ($625) to the two principal payments in the order

in which they were made and determine that the remaining amount of principal of both payments is treated as interest for tax purposes. Assuming that you qualify to claim

the student loan interest deduction, you can deduct

$401.02 ($87.89 + $10 + $303.13).

For 2026, you will continue to allocate $5 of the loan

origination fee to the principal portion of each monthly

payment you make and treat that amount as interest for

tax purposes. You will also apply the remaining amount of

capitalized interest ($625 − $303.13 = $321.87) to the

principal payments in the order in which they are made until the balance is zero and treat those amounts as interest

for tax purposes.

Don’t Include as Interest

You can’t claim a student loan interest deduction for any of

the following items.

• Interest you paid on a loan if, under the terms of the

loan, you aren’t legally obligated to make interest payments.

• Loan origination fees that are payments for property or

services provided by the lender, such as commitment

fees or processing costs.

• Interest you paid on a loan to the extent payments

were made through your participation in the National

Health Service Corps Loan Repayment Program (the

NHSC Loan Repayment Program) or certain other

loan repayment assistance programs. For more information, see Student Loan Repayment Assistance in

chapter 5.

When Must Interest Be Paid?

You can deduct all interest you paid during the year on

your student loan, including voluntary payments, until the

loan is paid off.

Can You Claim the Deduction?

Generally, you can claim the deduction if all of the following requirements are met.

• Your filing status is any filing status except married filing separately.

• No one else is claiming you as a dependent on their

tax return.

• You are legally obligated to pay interest on a qualified

student loan.

• You paid interest on a qualified student loan.

Claiming you as a dependent. Another taxpayer is

claiming you as a dependent if they list your name and

other required information on page 1 of their Form 1040,

1040-SR, or 1040-NR.

Publication 970 (2025)

Chapter 4

Example 1. During 2025, you paid $600 interest on

your qualified student loan. Only you are legally obligated

to make the payments. No one claimed you as a dependent for 2025. Assuming all other requirements are met,

you can deduct the $600 of interest you paid on your 2025

Form 1040 or 1040-SR.

Example 2. During 2025, you paid $1,100 interest on

your qualified student loan. Only you are legally obligated

to make the payments. Your parents claimed you as a dependent on their 2025 tax return. In this case, neither you

nor your parents may deduct the student loan interest you

paid in 2025.

Interest paid by others. If you are the person legally obligated to make interest payments and someone else

makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and,

in turn, paying the interest.

Example 1. You obtained a qualified student loan to

attend college. After graduating from college, you worked

as an intern for a nonprofit organization. As part of the internship program, the nonprofit organization made an interest payment on your behalf. This payment was treated

as additional compensation and reported in box 1 of your

Form W-2. Assuming all other qualifications are met, you

can deduct this payment of interest on your tax return.

Example 2. You obtained a qualified student loan to

attend college. After graduating from college, the first

monthly payment on the loan was due in December. As a

gift, your mother made this payment. No one is claiming

you as a dependent on their tax return. Assuming all other

qualifications are met, you can deduct this payment of interest on your tax return.

No Double Benefit Allowed

You can’t deduct as interest on a student loan any amount

that is an allowable deduction under any other provision of

the tax law (for example, home mortgage interest).

You also can’t deduct as interest on a student loan any

amount paid from a distribution of earnings made from a

QTP after 2018 to the extent the earnings are treated as

tax free because they were used to pay student loan interest. For more information, see chapter 7.

For payments made after March 27, 2020, do not deduct as interest on a student loan any interest paid by your

employer under an educational assistance program. See

chapter 10.

Figuring the Deduction

Your student loan interest deduction is generally the

smaller of:

• $2,500, or

• The interest you paid during the tax year.

Student Loan Interest Deduction

However, the amount determined above may be phased

out (gradually reduced) or eliminated based on your filing

status and MAGI as explained below. You can use Worksheet 4-1 (at the end of this chapter) to figure both your

MAGI and your deduction.

Form 1098-E. To help you figure your student loan interest deduction, you should receive Form 1098-E. Generally, an institution (such as a bank or governmental

agency) that received interest payments of $600 or more

during 2025 on one or more qualified student loans must

send Form 1098-E (or an acceptable substitute) to each

borrower by February 2, 2026 (January 31 falls on a Saturday).

For qualified student loans taken out before September

1, 2004, the institution is required to include on Form

1098-E only payments of stated interest. Other interest

payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive.

However, if you pay qualifying interest that isn’t included

on Form 1098-E, you can also deduct those amounts. See

Allocating Payments Between Interest and Principal, earlier.

The lender may ask for a completed Form W-9S or similar statement to obtain the borrower’s name, address, and

taxpayer identification number. The form may also be

used by the borrower to certify that the student loan was

incurred solely to pay for qualified education expenses.

Effect of the Amount of Your Income

on the Amount of Your Deduction

The amount of your student loan interest deduction is

phased out (gradually reduced) if your MAGI is between

$85,000 and $100,000 ($170,00 and $200,000 if you file a

joint return). You can’t claim a student loan interest deduction if your MAGI is $100,000 or more ($200,000 or more if

you file a joint return).

Modified adjusted gross income (MAGI). For most

taxpayers, MAGI is AGI as figured on their federal income

tax return before subtracting any deduction for student

loan interest. However, as discussed below, there may be

other modifications.

Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction.

Table 4-2. Effect of MAGI on Student Loan

Interest Deduction

IF your filing

status is...

THEN your student

loan interest

deduction is...

AND your MAGI is...

single,

head of

household, or

qualifying

surviving

spouse

married filing

joint return

not more than $85,000

not affected by the

phaseout.

more than $85,000

but less than

$100,000

reduced because of the

phaseout.

$100,000 or more

eliminated by the

phaseout.

not more than $170,000

not affected by the

phaseout.

more than $170,000

but less than $200,000

reduced because of the

phaseout.

$200,000 or more

eliminated by the

phaseout.

MAGI when using Form 1040 or 1040-SR. If you file

Form 1040 or 1040-SR, your MAGI is the AGI on line 11a

of that form figured without taking into account any

amount on Schedule 1 (Form 1040), line 21 (student loan

interest deduction), and modified by adding back any:

1. Foreign earned income exclusion,

2. Foreign housing exclusion,

3. Foreign housing deduction,

4. Exclusion of income by bona fide residents of American Samoa, and

5. Exclusion of income by bona fide residents of Puerto

Rico.

MAGI when using Form 1040-NR. If you file Form

1040-NR, your MAGI is the AGI on line 11a of that form

figured without taking into account any amount on Schedule 1 (Form 1040), line 21 (student loan interest deduction).

Phaseout. If your MAGI is within the range of incomes

where the credit must be reduced, you must figure your reduced deduction. To figure the phaseout, multiply your interest deduction (before the phaseout but not more than

$2,500) by a fraction. The numerator (top part) is your

MAGI minus $85,000 ($170,000 in the case of a joint return). The denominator (bottom part) is $15,000 ($30,000

in the case of a joint return). Subtract the result from your

deduction (before the phaseout) to give you the amount

you can deduct.

Example 1. During 2025, you paid $800 of interest on

a qualified student loan. Your 2025 MAGI is $185,000 and

you are filing a joint return. You must reduce your deduction by $400, figured as follows.

$800

$185,000 − $170,000

$30,000

$400

Your reduced student loan interest deduction is $400

($800 − $400).

Chapter 4

Student Loan Interest Deduction

Publication 970 (20

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