!

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).

Publication 970 (2025) Chapter 3 Lifetime Learning Credit 23

to tuition had to be paid. This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and student government. No portion of the fee covers personal expenses. Although labeled as a student activity fee, the fee is required for Marci’s enrollment and attendance at College X. Therefore, it is a qualified expense.

No Double Benefit Allowed

You can’t do any of the following.

• Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses.

• Claim a lifetime learning credit for any student and use any of that student’s expenses in figuring your American opportunity credit.

• Claim a lifetime learning credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). See Coordi- nation With American Opportunity and Lifetime Learn- ing Credits in chapter 6 and Coordination With Ameri- can Opportunity and Lifetime Learning Credits in

chapter 7.

• Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. See Adjustments to Qualified Education Ex- penses next.

Adjustments to Qualified Education Expenses

For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. The result is the amount of adjusted qualified education expenses for each student.

Tax-free educational assistance. For tax-free educational assistance received in 2025, reduce the qualified education expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. See Academic period , earlier.

Some tax-free educational assistance received after 2025 may be treated as a refund of qualified education expenses paid in 2025. This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2025 for qualified education expenses paid on behalf of a student in 2025 (or attributable to enrollment at an eligible educational institution during 2025).

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 part 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