American Opportunity Tax Credit (AOTC): This credit offers up to $2,500 per eligible student for the first four years of higher education. It covers 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000. To qualify, the student must be pursuing a degree or other recognized education credential and be enrolled at least half-time. Income limits apply, with the credit phasing out for modified adjusted gross income (MAGI) above $80,000 ($160,000 for joint filers). Notably, up to 40% of the AOTC is refundable, meaning you can receive up to $1,000 even if you owe no taxes.

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Lifetime Learning Credit (LLC): The LLC provides a credit of up to $2,000 per tax return for qualified tuition and related expenses. Unlike the AOTC, it is available for all years of postsecondary education and for courses to acquire or improve job skills. The credit is worth 20% of the first $10,000 of qualified education expenses. Income limits apply, with the credit phasing out for MAGI above $80,000 ($160,000 for joint filers). Unlike the AOTC, the LLC is non-refundable, so it can reduce your tax to zero but won't result in a refund.

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Student Loan Interest Deduction: Parents who have taken out loans to pay for their child's education may be eligible to deduct up to $2,500 of interest paid on qualified student loans. This deduction is available even if you do not itemize deductions on your tax return. Income limits apply, with the deduction phasing out for MAGI above $70,000 ($140,000 for joint filers).

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529 College Savings Plans: Contributions to a 529 plan grow tax-deferred, and withdrawals used for qualified education expenses are tax-free. While contributions are not deductible on federal taxes, many states offer tax deductions or credits for contributions to their state's 529 plan. Additionally, under the SECURE Act, up to $10,000 from a 529 plan can be used to repay student loans.

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