The tax law provides several tax benefits for people attending school. If you can take advantage of them, you are in effect receiving a government subsidy that lowers the cost of education.
The American Opportunity Tax Credit, the Lifetime Learning credit, the student loan interest deduction, and state-sponsored college tuition programs and Coverdell ESAs can provide substantial tax savings. The above-the-line deduction for higher education tuition and fees may be available if you do not claim an American Opportunity or Lifetime Learning credit. However, these tax benefit provisions are hedged with restrictions, such as income-based limitations, that may bar or limit their availability.
33.1 Scholarships and Grants
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