Which Education Expenses Qualify for Deduction?

Deducting expenses you racked up during your education can offer a little bit of a break at tax time. Certain educational expenses qualify while other do not. The general rule is that “qualifying” educational expenses include money you paid for tuition and other fees for an eligible student.

While that seems like it covers a majority of expenses, there are some costs that aren’t eligible for deduction:

  • Room and board
  • Insurance
  • Student health fees
  • Transportation
  • Personal expenses
  • Non-credit courses and activities, unless it is applicable to the student’s degree program.

You are able to claim a deduction for expenses you paid in cash, credit, check or through a loan. If you pay with a loan, you’ll deduct the expense the year you paid it with the loan, not the year you receive the loan nor the year it enters repayment.

Educational Credits

There are two credits you can claim to help lighten the load of educational expenses.

Books, supplies, and equipment expenses are all considered qualifying expenses as part of the American Opportunity Credit.

Though generally not qualifying, expenses incurred from sports, games, hobbies and other non-credit activities can sometimes count toward the Lifetime Learning Credit if the activity or course helps the student achieve specific job skills. Additionally, the Lifetime Learning Credit is available to students not receiving a degree, but instead are seeking to improve their relative job skills.


Typical Errors in Education Deductions

The IRS reports four common errors that taxpayers make when attempting to claim education credits:

  1. The student who claims the credit is a dependent or spouse on another taxpayer’s return
  2. The student doesn’t have a Form 1098-T, indicating that they were enrolled in an eligible institution of higher education
  3. The student didn’t pay any expenses that qualify
  4. The tax return claims a credit for a student who is ineligible or didn’t attend a college or other institution.