Several tax benefits reduce the cost of education, but you cannot double-dip with the same expenses.
Credits
The American Opportunity Tax Credit is worth up to $2,500 per student for the first four years of postsecondary education, with up to $1,000 refundable. The Lifetime Learning Credit is worth up to $2,000 per return for any level of education. Both phase out at higher incomes.
Deductions and savings accounts
The student loan interest deduction allows up to $2,500 of interest to be deducted, subject to income phase-outs. 529 plans offer tax-free qualified withdrawals, and Coverdell accounts allow limited contributions.
Coordination
You cannot use the same expenses for both a credit and a tax-free 529 withdrawal. Plan which expenses to pay from which source, and keep Form 1098-T and receipts. A tax professional or software can help optimize.
Try the numbers
Use our Education Tax Credit Calculator (AOTC & LLC) to see this in practice. With its default example (Qualified education expenses: $6,000; MAGI: $72,000; Filing status: Single / HoH), it shows best credit: $2,500. Adjust the inputs to match your situation.
Key takeaways
- AOTC offers up to $2,500 per student.
- You cannot double-dip the same expenses.
- Keep Form 1098-T and receipts.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.