Education tax benefits cheat sheet
At a glance
+ Students and their parents can reduce their taxes with education credits, such as the American Opportunity Credit and Lifetime Learning Credit.
+ Qualifying educators can get a tax break of up to $300 for specific classroom expenses through the Educators Credit, even if they don’t itemize deductions.
+ Student loan interest can be deducted from taxes, but only by the person who is legally responsible for the loan.
Teachers and students are back in the classroom—and may need some insight into the education tax benefits that can help them with their expenses.
Tax benefits for education, which can save students or their parents as much as $2,500 in taxes, are sometimes overlooked. Many taxpayers miss these valuable benefits because of their complexity. Depending on the kind of academic program, what year the student is in, income, and other factors, you may qualify for several different tax benefits, so it’s important to choose the one that maximizes tax savings.
Tax reform makes 529s more versatile
529 plans have long been known to help families save for college. Starting with tax year 2025, recent tax law changes increased the amount of tax-exempt distributions that can be used for K-12 expenses to $20,000 (up from $10,000). Contributions to a 529 plan aren’t deductible on a federal return, but can grow tax-free until distributed. However, many states allow deductions or credits for contributions to their plans. Qualified distributions are also tax free if they are less than the beneficiary’s adjusted qualified education expenses, after accounting for other education-related tax benefits. Certain states may not allow tax free withdrawals from 529 plans for K-12 education expenses. You can check with a local H&R Block tax pro to find how your specific state treats such withdrawals.
Education tax credit eligibility alone can’t determine the best tax benefit
The Lifetime Learning Credit, worth up to $2,000 per tax return, is for taxpayers who pay qualified education expenses, such as tuition and fees, for themselves, their spouses or their dependents. This credit does not require the student to pursue a degree, making this an option for anyone acquiring or improving their job skills through an eligible educational institution. More detailed eligibility requirements relate to a taxpayer’s income and filing status.
The American Opportunity Credit, an education tax credit worth up to $2,500 per student, is for taxpayers who pay qualified education expenses such as tuition and fees and purchase course materials for themselves, their spouses or their dependents. The credit has more restrictions than the Lifetime Learning Credit, but on the upside, up to $1,000 is refundable, meaning it can be claimed even if the taxpayer has no tax liability. Generally, students supported by their parents may not claim the refundable credit.
Only one Lifetime Learning Credit can be claimed each year per tax return, whereas the American Opportunity Credit can be claimed for any number of eligible students. However, a taxpayer cannot claim both the Lifetime Learning and the American Opportunity credits for the same student in the same year, so taxpayers will need to study up on which credit better suits their specific situation. Proper planning can maximize educational tax benefits.
Taxpayers should keep their Form 1098-T as well as accurate records of tuition and expenses so they can claim all the benefits they’re entitled to.
Student loan interest deduction makes repaying student loans a little easier
When students start repaying their student loan, they may qualify to deduct student loan interest—even if they don’t itemize their deductions. The maximum $2,500 deduction is “above the line,” and may be claimed by completing Schedule 1 of Form 1040. This is a per-tax-return limitation, so married couples who are both repaying student loans can’t deduct more than $2,500 annually on their joint return.
Taxpayers can deduct student loan interest they pay on a loan they took out for themselves, their spouse, or a dependent if they are the ones who are legally responsible for repaying the dependent’s loan. However, a parent cannot deduct student loan interest on a loan their child is responsible for repaying. Once the child is no longer claimed as a dependent, the child may deduct the student loan interest. If the parents make any loan payments on the child’s behalf, the payments are treated as a gift to the child and the child is treated as repaying the loan. In this situation, no one can claim the student interest deduction.
Teachers may deduct $300 for classroom supplies
Starting in 2025, teachers for kindergarten through 12th grade can deduct up to $300 for classroom expenses, regardless of whether they itemize their deductions. The $300 limit is indexed for inflation. If Married Filing Jointly and both spouses are eligible educators, the deduction is worth up to $600.
Note: In addition to the existing $300 above-the-line deduction, there’s an additional educator deduction available for those who itemize starting in tax year 2026.
Get help claiming education credits
Need assistance claiming education credits? Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.
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