🎓 What Education Expenses Are Tax-Deductible? A Simple Guide

College and continuing education can get expensive fast. Tuition, books, fees, supplies… it adds up. Naturally, the big question becomes:
“Which education expenses can I actually claim on my taxes?”

The answer depends on which benefit you’re trying to qualify for — usually the American Opportunity Credit (AOC) or the Lifetime Learning Credit (LLC). Here’s a clean, updated guide to what counts, what doesn’t, and how to stay compliant.

🎁 Education Credits & What Counts for Each

🎓 American Opportunity Credit (AOC)

Qualifying expenses include:
✔️ Tuition
✔️ Mandatory enrollment fees
✔️ Required books, materials, and supplies — even if NOT purchased from the school

This credit is available for the first four years of post-secondary education and is often the most generous.

📘 Lifetime Learning Credit (LLC)

Qualifying expenses include:
✔️ Tuition
✔️ Mandatory enrollment fees
✔️ Books/materials — only if you buy them directly from the school

🔍 Key distinction:
For the LLC, books and supplies must be purchased through the institution to count.
For the AOC, they do not.

Both credits can be claimed for yourself, your spouse, or your dependents — even if someone else pays the bill (like a relative or loan disbursement).

🚫 Expenses That DO NOT Qualify for Either Credit

These may be essential for attending school, but the IRS says no:
❌ Room and board
❌ Insurance (including student health fees)
❌ Transportation
❌ Medical expenses
❌ Personal or living expenses (laundry, dorm supplies, meals, etc.)
❌ Optional fees or expenses not required for enrollment

⚠️ Eligibility Restrictions

You cannot claim the AOC or LLC if:

• You file Married Filing Separately

• You are claimed as a dependent

• Your MAGI is above the allowed phase-out limits of Single $90,000 or MFJ $180,000.

• You (or your spouse) are a nonresident alien unless you elect to be treated as a U.S. resident

• Expenses were paid with tax-free funds (scholarships, employer assistance, or tax-free 529/Coverdell distributions)

• You used the same expenses to claim another education tax benefit

📚 Updated Example: Qualified Education Expenses

Jordan (single filer) paid the following for one academic year:

• Tuition: $3,600

• Required books and materials: $400

• Student health fee: $150

• Room and board: $4,200

• Personal expenses: $1,000

What qualifies for the American Opportunity Credit?

👉 $4,000 (tuition + required course materials)

The health fee, room/board, and personal expenses do not qualify for either education credit.

🧑‍💼 Business-Related Education — When You CAN Deduct It

Separate from the credits above, some education may be deductible as a business expense if it meets one of these tests:

✔️ Employer Requirement

The education is required by your employer to keep your current position, pay level, or professional status — and it serves a legitimate business purpose.

✔️ Skill Improvement

It maintains or improves skills needed in your present job or trade.

❌ What doesn’t qualify?

Any education that prepares you for a new career, even indirectly. For example:

• A bookkeeper studying to become a CPA

• A teacher studying to become a therapist

• A nurse studying to become a physician

These are considered pathways to a new profession, so the deductions are not allowed.

📝 Final Thoughts

Education expenses can open the door to powerful tax benefits — but only if you know which expenses count toward which credit. Understanding the difference between qualifying vs. non-qualifying costs helps you maximise your refund and avoid IRS issues.

If you’re unsure how your education expenses stack up or what benefits you qualify for, I’m here to help.

👉 Book a call with Lisa Brugman, EA & Associates, and let’s make sure your education benefits work to your advantage.