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CAUTION

You can’t use any amount you paid in 2024 or 2026 to figure the qualified education expenses you use to figure your 2025 education credit(s).

In the following examples, assume that each student is an eligible student at an eligible educational institution.

Example 1. Jefferson is a sophomore in University V’s degree program in dentistry. This year, in addition to tuition, there is a requirement to pay a fee to the university for the rental of the dental equipment used in this program. Because the equipment rental is needed for this course of study, Jefferson’s equipment rental fee is a qualified expense.

Example 2. Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. The college has no policy about how students should obtain these materials, but any student who purchases them from College W’s bookstore will receive a bill directly from the college. William bought the

Publication 970 (2025) Chapter 2 American Opportunity Credit 13

If this tax-free educational assistance is received after 2025 but before you file your 2025 income tax return, see Refunds received after 2025 but before your income tax return is filed , later. If this tax-free educational assistance is received after 2025 and after you file your 2025 income tax return, see Refunds received after 2025 and after your income tax return is filed , later.

Tax-free educational assistance includes:

• The tax-free parts of scholarships and fellowship grants (see Tax-Free Scholarships and Fellowship Grants in chapter 1),

• The tax-free part of Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chap-

ter 1),

• Employer-provided educational assistance (see chapter 10),

• Veterans’ educational assistance (see Veterans’ Ben- efits in chapter 1), and

• Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.

Generally, any scholarship or fellowship grant is treated as tax free. However, a scholarship or fellowship grant isn’t treated as tax free to the extent the student includes it in gross income (the student may or may not be required to file a tax return for the year the scholarship or fellowship grant is received) and either of the following is true.

• The scholarship or fellowship grant (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1.

• The scholarship or fellowship grant (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1.

A student can’t choose to include in income a