Here’s what HIVE AI had to say about “How do education credits or deductions work for 2025 if I or my child is in college or a training program?”:
For 2025, the main federal education tax benefits for college or many job-training programs are generally the two education credits (AOTC and LLC) plus a few “education-related” exclusions/deductions (student loan interest, employer assistance, savings bond interest exclusion). Which one you can use depends on the student, the school/program, what expenses you paid, and your income.
Education credits (the most common benefits)
American Opportunity Tax Credit (AOTC)
- What it can be worth: up to $2,500 per eligible student per year, for up to 4 tax years; part may be refundable. 1
- Who it’s for: generally the first 4 years of postsecondary education in a program leading to a degree/certificate/credential, and the student must be at least half-time for at least one academic period in the year. 8
- Income limits (phaseout): for 2025, the AOTC phases out based on MAGI, and the instructions list the MAGI limits as $90,000 (single/HOH/QSS) or $180,000 (MFJ). 8
Lifetime Learning Credit (LLC)
- What it can be worth: up to $2,000 per return (not per student). 1
- Who it’s for: any level of postsecondary education (including grad school) and also courses to acquire or improve job skills (so long as they’re taken at an eligible educational institution). 1
- Income limits (phaseout): for 2025, the instructions list the MAGI limits as $90,000 (single/HOH/QSS) or $180,000 (MFJ). 8
Key “mechanics” for both credits
- Eligible school/program: generally must be an eligible educational institution (many accredited colleges, universities, vocational schools, and other postsecondary schools that participate in U.S. Dept. of Education student aid programs). If it’s a “training program,” it usually qualifies only if it’s offered through such an eligible institution (or otherwise meets the IRS “eligible educational institution” rules). 2
- Who claims it (parent vs. student): if the student is your dependent, the education expenses are treated as paid by you for credit purposes (even if the student paid them), so you generally claim the credit. 8
- Form 1098-T: you generally must receive Form 1098-T to claim AOTC/LLC, but there are exceptions (for example, certain nonresident aliens, expenses paid entirely with scholarships, certain billing arrangements, or no academic credit). 3 8
- Timing rule (what year the payment counts): for 2025 credits, you generally use qualified expenses you paid in 2025 for academic periods beginning in 2025, and you can also include expenses paid in 2025 for an academic period beginning in the first 3 months of 2026 (treated as beginning in 2025). 8
- No “double dipping” on the same expenses: qualified expenses used for an education credit must generally be reduced by tax-free educational assistance (including tax-free scholarships), and you can’t use the same expenses for multiple education tax benefits. 4 3
- Choosing AOTC vs. LLC: you can claim both credits on the same return, but not for the same student in the same year. 8
Other common education-related deductions/exclusions (often relevant with training programs too)
Student loan interest deduction (Section 221)
- Separate from education credits: you may be able to deduct student loan interest (subject to eligibility and income limits). The regulations define qualified higher education expenses broadly for this purpose (cost of attendance items such as tuition/fees, room and board, books/supplies, transportation, etc., as determined under the Higher Education Act framework, with required reductions). 2
Employer-provided educational assistance (Section 127)
- If your employer pays qualifying education assistance, it may be excludable from income up to the program limits.
- For payments made before January 1, 2026, “educational assistance” can include employer payments of principal or interest on an employee’s qualified education loan (if the employer has a qualifying educational assistance program). 5
Savings bond interest exclusion (Section 135)
- If you cashed certain U.S. savings bonds and used the proceeds for qualified higher education expenses, you may be able to exclude some/all of the bond interest, subject to MAGI phaseouts and other requirements; also, the statute coordinates this exclusion with education credits/529/ESA so the same expenses aren’t used twice. 6 7
What counts as “college or training program” for credits (practical framing)
- If the program is at an eligible educational institution and you receive (or should receive) a Form 1098-T, it’s commonly within the AOTC/LLC system.
- If it’s a standalone training course not at an eligible postsecondary institution, it often won’t qualify for AOTC/LLC (even if it’s career-related), though other benefits (like employer assistance under a Section 127 plan) might still apply. 1 3
If you tell me (1) whether the student is your dependent for 2025, (2) the school type (college/community college/trade school/bootcamp), and (3) whether you received Form 1098-T, I can narrow this to the specific credit/deduction that typically applies.
Sources
1 – IRS – Publication 5198 Are you or a family member attending college or taking courses to acquire or improve job skills?
2 – Treasury Regulation 1.221-1
3 – IRS – Publication 970 Tax Benefits for Education
4 – IRC § 25A(g)
5 – IRC § 127(c)
6 – IRC § 135(d)
7 – Rev. Proc. 2025-32
8 – Instructions for Form 8863 (2025)
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