🎓 Tax Breaks for Undergrad & Grad Students (Yes, Even You, Grad School Warriors)

Stack of books, graduation hat, and diploma not required—but highly encouraged.

Can You Still Get a Tax Break for Undergrad or Graduate School Tuition in 2025?

Let’s be honest: higher education is a serious investment. And by “investment,” we mean it costs a fortune. 🧾

If you’re an undergrad, you’ve probably heard about tax credits that help lighten the load. But what about grad school? Can you still get a tax break?

Good news: Yes—but there are some caveats and a few IRS hoops to jump through.

Let’s break it down.

🎁 The American Opportunity Credit (AOC)

This credit is designed for undergraduate students, specifically for the first four years of post-secondary education. Think of it as a reward for surviving midterms, ramen, and overpriced textbooks.

✅ AOC Eligibility Requirements:

• Only applies to the first 4 years of college

• Must be enrolled at least half-time

• Must be pursuing a degree at an eligible institution

• No felony drug convictions

• Modified AGI must be under $90,000 (or $180,000 if MFJ)

• You cannot file as married filing separately

• Must receive Form 1098-T from your school

💸 What Counts as a Qualified Expense?

• Tuition

• Required enrollment fees

• Required books and materials

💡 Bonus Tip for Grad Students:

While the AOC is primarily targeted at undergrads, but there’s one unique exception where grad students might still qualify:

If you begin the tax year in your final undergraduate semester, graduating in the spring, and start grad school in the fall of that same year, you may still claim the AOC—for up to $4,000 of qualifying expenses—because at the beginning of the year, you were still within your first four years of post-secondary education.

Nice little IRS loophole. We’ll take it!

💵 How Much Is It Worth?

• Up to $2,500 per student

• Up to $1,000 is refundable, even if you owe no tax

🔁 The Lifetime Learning Credit (LLC)

This one’s the MVP for grad students and lifelong learners. No time limits. No degree required. Just consistent support for leveling up.

✅ LLC Eligibility Requirements:

• Courses must be at an eligible institution

• Can be for a degree, certificate, or job-skill upgrade

• Modified AGI must be under $90,000 (or $180,000 if MFJ)

• Cannot file as married filing separately

• Must receive Form 1098-T

💸 Qualified Expenses:

• Tuition and required fees

• Books and materials only if required and paid directly to the school
  (← This clarification is important for IRS compliance)

💵 How Much Is It Worth?

• 20% of up to $10,000 = max $2,000 per return

• Not refundable, so it only reduces the taxes you owe

⚖️ AOC vs. LLC: What’s Better?

🧠 So, Which One Should You Claim?

• Still in undergrad (within first 4 years)? → AOC is your best friend.

• In grad school or beyond year 4? → LLC is likely your only option.

• Eligible for both? → Choose the one with the greater benefit—you can’t double-dip.

💬 Lisa’s Final Word

Grad school may come with long papers and caffeine-fueled nights, but it shouldn’t come with extra tax stress.

Between the AOC and the LLC, you might be able to take the sting out of tuition costs—at least a little.

That said, the IRS isn’t always the easiest to navigate. Your eligibility depends on income limits, enrollment status, how and where you paid your expenses, and whether you checked all the right boxes.

📅 Need help figuring it out?

Book a call with Lisa Brugman, EA & Associates.
We’ll review your education expenses, crunch the numbers, and help you maximize your credits while staying IRS-compliant.