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For federal education credits, tuition and fees required for enrollment or attendance at an eligible educational institution generally qualify. The key difference between the American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) is how they treat course books, supplies, and equipment: those may qualify for the AOTC even when bought elsewhere, but generally qualify for the LLC only when they must be paid directly to the institution. Room and board, transportation, insurance, medical costs, and similar personal expenses do not qualify.
Which expenses qualify for each credit?
The rules below summarize federal IRS guidance. Whether an expense qualifies is separate from whether a student or taxpayer meets the other requirements to claim a particular credit.
| Expense | AOTC | LLC |
|---|---|---|
| Tuition and fees required for enrollment or attendance | Generally qualify | Generally qualify |
| Student activity fees | Qualify only if the institution requires payment as a condition of enrollment or attendance | Qualify only if the institution requires payment as a condition of enrollment or attendance |
| Books, supplies, and equipment needed for the course of study | May qualify, including when bought from a seller other than the institution | Generally qualify only if required to be paid directly to the institution as a condition of enrollment or attendance |
| Room and board, transportation, insurance, medical expenses, and similar personal or living costs | Do not qualify | Do not qualify |
See the IRS qualified education expenses overview and Instructions for Form 8863 for the expense rules.
How course materials and course type affect eligibility
Books, supplies, and equipment
For the AOTC, course materials must be needed for the student’s course of study, but they do not have to be purchased from the school. A required textbook bought from an independent bookseller may therefore qualify; a book that is merely useful or generally related to the subject is not automatically a qualified expense.
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The LLC rule is narrower: books, supplies, and equipment generally count only when the student must pay for them directly to the institution as a condition of enrollment or attendance. The fact that a course requires an item does not by itself make an independently purchased item eligible for the LLC.
Sports, hobbies, and noncredit classes
Expenses for sports, games, hobbies, or noncredit courses generally do not qualify. IRS guidance describes exceptions when a course is part of the student’s degree program. For the LLC, a course taken to acquire or improve job skills can also qualify. Check the IRS education credits FAQ for the applicable course rules.
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When the expense was paid matters
For a 2025 federal return, use qualified expenses paid or deemed paid during 2025. A payment can count when it is for an academic period that begins in 2025 or in the first three months of 2026, assuming the other requirements are met. An academic period may be a semester, trimester, quarter, or another period of study.
Do not assume the amount in Form 1098-T’s payment field is the amount you paid or deemed paid for credit purposes. The IRS notes that the form’s reported amount may differ, so keep records of the actual payments and the academic period they covered. See Publication 970 (2025), Tax Benefits for Education for the tax-year-specific rules.
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What records and forms should you check?
- Form 1098-T: A taxpayer or dependent generally must receive this form to qualify, but the IRS describes exceptions, including situations where an institution is not required to furnish it or a required form has not arrived before filing. Follow the publication’s conditions and substantiation steps rather than treating the form as an unconditional rule.
- Payment records: Keep receipts, account statements, and other records showing what was paid, when it was paid, and which academic period the payment covered. Retain evidence that a fee or course material was required when that condition applies.
- Form 8863: This is the form used to claim the education credits. Consult the instructions for the return year being filed.
For returns claiming either credit beginning in 2026, Publication 970 (2025) says the claimant must have an SSN valid for work, issued before the return due date. If the claimant is not the student, the student also needs a valid SSN. This is a dated rule for claims beginning in 2026, not a general description of the SSN rule for a 2025 return.
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These are federal IRS rules, and the year of the return matters. A particular expense’s treatment can depend on the credit claimed, the course, the institution’s requirements, and when payment occurred. Review the IRS materials for the return year and your circumstances, or consult a qualified tax professional if those facts are unclear.
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