What this line means
Adjusted qualified education expenses for each student. Start with the total tuition and required enrollment fees paid to an eligible educational institution. For the AOTC only, add required course materials — books, supplies, and equipment needed for enrollment. 1 Then subtract all tax-free educational assistance: scholarships, Pell grants, employer-provided tuition assistance, veterans education benefits, and any other tax-free payments for education. The result is the adjusted amount used to calculate the credit on lines 27 or 31.
Does this apply to you?
- You paid tuition or required fees to an eligible college, university, or vocational school
- You received a Form 1098-T from the educational institution
- The expenses were for an academic period beginning in 2025 or in the first three months of 2026
- You have not already used the same expenses for another tax benefit (such as a tax-free distribution from a 529 plan)
Easy to overlook
Subtract scholarships and grants before entering expenses Tax-free scholarships, Pell grants, employer tuition reimbursement, and veterans education benefits all reduce qualified expenses dollar-for-dollar. If tuition is $8,000 and a scholarship covers $5,000, your qualified expenses are $3,000 — not $8,000. Entering the full tuition amount without subtracting tax-free aid is one of the most common errors on this form. 2 IRS Publication 970 — Qualified education expenses
The 1098-T amounts often do not match your actual expenses Box 1 on Form 1098-T shows amounts billed, not amounts paid. If you paid tuition in December 2024 for a spring 2025 semester, the timing matters. Use your actual payment records, not just the 1098-T. The IRS matches 1098-T data, so discrepancies trigger notices, but your records — not the 1098-T — determine the correct amount. 3 IRS Form 8863 instructions — Line 23
Room and board never qualify — even for the AOTC Room, board, insurance, medical expenses, transportation, and similar personal costs are excluded from both credits. Filers living on campus sometimes include their full student account bill, which bundles tuition with room and board. Only the tuition, required fees, and (for AOTC) required course materials count. 4 IRS Publication 970 — Qualified education expenses
Watch out for this
You cannot use the same expenses for both an education credit and a tax-free 529 distribution. If you withdraw $6,000 from a 529 plan to pay tuition, that $6,000 is not a qualified expense for Form 8863. Strategically splitting expenses — using 529 funds for room and board (which qualify for 529 purposes but not for credits) and paying tuition out of pocket — lets you maximize both benefits. Also, if the student claims the expense for the American Opportunity Credit, no other taxpayer can claim the same expense for the Lifetime Learning Credit.
Footnotes
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IRS Publication 970, Tax Benefits for Education, Qualified Education Expenses. https://www.irs.gov/pub/irs-pdf/p970.pdf ↩
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IRS Publication 970, Tax Benefits for Education, Adjustments to Qualified Expenses. https://www.irs.gov/pub/irs-pdf/p970.pdf ↩
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IRS Form 8863 Instructions, Part III, Line 23. https://www.irs.gov/instructions/i8863 ↩
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IRS Publication 970, Tax Benefits for Education, Expenses That Do Not Qualify. https://www.irs.gov/pub/irs-pdf/p970.pdf ↩