Only If Required

• For the tuition and fees deduction, the IRS only permits you to include fees paid to the school that are required of every student in your course of study. For example, if you are in a mechanical engineering class and the university charges you a fee to use the school's machinery for a course, and that fee must be paid by all students in the course, it would be deductible. However, if the expenses are merely supplies you can purchase anywhere, such as a textbook you could buy from the university bookstore but could also get online, you cannot include that cost in your deduction.
  
  

American Opportunity Credit

• The American Opportunity Credit differs from the other tax benefits for higher education in that it allows you to claim books and other supplies even if you do not purchase those items from the school. For example, if you purchase your textbooks online, you can include those costs in calculating your credit. However, you still cannot include optional costs, even in the American Opportunity Credit. To claim the American Opportunity Credit, you must be seeking a degree and in one of your first four years of postsecondary education.
  
  

Lifetime Learning Credit

• Like the tuition and fees deduction, the lifetime learning credit only permits you to include mandatory costs paid to the school in calculating the credit. For example, a required student activity fee or technology fee imposed on all students would qualify. However, this credit offers you a 20 percent credit on up to $10,000 of qualifying expenses. If you have more than $10,000 in tuition and qualifying fees, the fact that you cannot include books and expenses in your calculations does not impact your credit amount.
  
  

Limit One

• Though the IRS offers several tax breaks for qualifying educational costs, you can only claim one on your income tax return. If you qualify to claim multiple education tax breaks, you have to pick the one that will save you the most money. For most people, this will be the American Opportunity Credit, if you qualify, because it offers a tax credit of up to $2,500, while the tuition and fees deduction only allows a deduction of up to $4,000.