What — Publication 970 — Tax Benefits for Education

The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent you claim on your tax return. Generally, the credit is allowed for adjusted qualified education expenses paid in 2025 for an academic period beginning in 2025 or beginning in the first 3 months of 2026.

For example, if you paid $1,500 in December 2025 for qualified tuition for the spring 2026 semester beginning January 2026, you can use that $1,500 in figuring your 2025 credit.

As of the end of 2025, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance.

Example 1. Sharon was eligible for the American opportunity credit for 2019, 2020, 2022, and 2024. Sharon’s parents claimed the American opportunity credit for Sharon on their 2019, 2020, and 2022 tax returns. Sharon claimed the American opportunity credit on her 2024 tax return. The American opportunity credit has been claimed for Sharon for 4 tax years before 2025. Therefore, the American opportunity credit can’t be claimed for Sharon for 2025. If Sharon files Form 8863 for 2025, the box on line 23 should be checked “Yes” and only the lifetime learning credit would be able to be claimed.

Example 2. Wilbert was eligible for the American opportunity credit for 2021, 2022, 2023, and 2025. Wilbert’s parents claimed the American opportunity credit for Wilbert on their tax returns for 2021, 2022, and 2023. No one claimed an American opportunity credit for Wilbert for any other tax year. The American opportunity credit has been claimed for Wilbert for only 3 tax years before 2025. Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. If Wilbert files Form 8863 for 2025, the box on line 23 should be checked “No.” If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit.

Example 3. Glenda enrolls on a full-time basis in a degree program for the 2026 spring semester, which begins in January 2026. Glenda pays the tuition for the 2026 spring semester in December 2025. Because the tuition Glenda paid in 2025 relates to an academic period that begins in the first 3 months of 2026, the eligibility to claim an American opportunity credit in 2025 is determined as if the 2026 spring semester began in 2025. Therefore, Glenda satisfies this third requirement.

Publication 970 (2025) Chapter 2 American Opportunity Credit 11

Figure 2-1. Can You Claim the American Opportunity Credit for 2025?

*Qualified education expenses paid by a dependent you claim on your tax return, or by a third party for that dependent, are considered paid by you.

**Your education credits may be limited to your tax liability minus certain credits. See Form 8863 for more details.

Academic period. An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. If an educational institution uses credit hours or clock hours and doesn’t have academic terms, each payment period can be treated as an academic period.

Paid with borrowed funds. You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Use the expenses to figure the American opportunity credit for the year in which the

expenses are paid, not the year in which the loan is repaid. Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student’s account.

Student withdraws from class(es). You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws.

12 Chapter 2 American Opportunity Credit Publication 970 (2025)

Qualified Education Expenses

For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution.

Eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. Virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions meet this definition.

An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in a student aid program administered by the U.S. Department of Education.

TIP

The educational institution should be able to tell you if it is an eligible educational institution.

Related expenses. Student activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance.

However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution.

Prepaid expenses. Qualified education expenses paid in 2025 for an academic period that begins in the first 3 months of 2026 can be used in figuring an education credit for 2025 only. See Academic period, earlier. For example, if you pay $2,000 in December 2025 for qualified tuition for the 2026 winter quarter that begins in January 2026, you can use that $2,000 in figuring an education credit for 2025 only (if you meet all the other requirements).

books from a friend; Grace bought the books at College W’s bookstore. Both are qualified education expenses for the American opportunity credit.

Example 3. When Kelly enrolled at College X for the freshman year, the school required payment of a separate student activity fee in addition to the tuition. 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 the student government. No portion of the fee covers personal expenses. Although labeled as a student activity fee, the fee is required for Kelly’s enrollment and attendance at College X and 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 an American opportunity credit based on those same expenses.
Claim an American opportunity credit for any student and use any of that student’s expenses in figuring your lifetime learning credit.
Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. See Coordination With American Opportunity and Lifetime Learning Credits in chapter 6 and Coordination With American 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 educational 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).