Take Advantage of Education Tax Breaks
The American Opportunity tax credit can help offset the cost of college tuition.

My son will be starting college this fall, and we’ll be paying his first tuition bill this summer. We have money in his 529 plan and will need to use some cash from our regular bank account, too. Which account should we withdraw from first?
DOWNLOAD: Smart Ways to Save for College
Before you tap the 529 account for this semester’s tuition bill, see whether you can take advantage of the American Opportunity tax credit, which provides a tax credit of up to $2,500 each year for eligible college costs. You can’t double-dip on tax breaks -- that is, use a tax-free distribution from a 529 or Coverdell education saving account to cover the same expenses for which you claim the tax credit -- so you may not be able to qualify for the credit if you pay all of the bills from the 529.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
To qualify for the American Opportunity tax credit, your adjusted gross income must be less than $90,000 if you are single, or $180,000 if you’re married filing jointly (the size of the credit starts to phase out at $80,000 for singles and $160,000 for couples filing jointly). Money you spend on tuition, fees and books in the first four years of college can count toward the credit.
The credit is worth 100% of the first $2,000 you pay for eligible expenses, plus 25% of the next $2,000 of eligible expenses. So, you could pay at least $4,000 of the tuition bill from your bank account, then use the 529 for any remaining portion of the tuition bill, plus room and board (room and board qualifies for 529 money but not for the American Opportunity credit). For details, see IRS Publication 970 Tax Benefits for Education. Also see my column about Tax Breaks and Credits for College Costs.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
-
Stocks Swing in Volatile Session: Stock Market Today
The main indexes fell sharply in early trading on rising China tensions, but rebounded thanks to encouraging bank earnings.
-
Don't Miss Out! A Quiz on Medicare Enrollment Deadlines
Quiz Test your basic knowledge of Medicare enrollment periods in our quick quiz.
-
IRS Updates 2026 Tax Deduction for People Age 65 and Older
Tax Changes Adjustments to the extra standard deduction can impact the tax bills of millions of older adults. Here are some new amounts to know for 2026.
-
Family Tax Credits 2026: New IRS Changes That Can Save You Money
Tax Credits While the child tax credit remains the same, other family tax credits are higher for 2026, including the earned income tax credit and other inflation-adjusted amounts. Here's what they're worth now.
-
Standard Deduction 2026 Amounts Are Here
Tax Breaks What is the standard deduction for your filing status in 2026?
-
Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025
Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify).
-
IRS Names Its First CEO: But He’s Also Still Running Social Security
Tax News Will this new role make it difficult to address emerging issues like budget and staffing cuts and customer service concerns?
-
New Tax Rules: Income the IRS Won’t Touch in 2025
Income Taxes From financial gifts to Roth withdrawal rules, here’s what income stays tax-free under the new Trump 2025 tax bill, and some information on what’s changed.
-
Three Popular Tax Breaks Are Gone for Good in 2026
Tax Breaks Here's a list of federal tax deductions and credits that you can't claim in the 2026 tax year. High-income earners could also get hit by a 'surprise' tax bill.
-
Tax Brackets 2025 Quiz: How Much Do You Know?
Quiz Test your knowledge of IRS rules that impact how much money you keep in your wallet.