IRS Pub. 970 - Tax Year 2025 Updates - Education Credits and Savings

Sep 2, 2026

Tax Year 2025 highlights for IRS Publication 970 focus on education-related tax benefits, including recent legislative changes such as new “Trump account” elections via Form 4547 and related guidance. The material also explains eligibility limits for student loan interest deductions and education savings bond interest exclusions based on MAGI thresholds. It further covers work-related education business deductions, IRA treatment of certain scholarships and fellowship payments, higher education emergency grant exclusions, and program rules for the American Opportunity Credit.

LanguageEnglish

CategoryExam

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Pages81

Reading Time3 h 24 min

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What’s New for Tax Year 2025

Trump accounts and Form 4547

Student loan interest deduction

Education savings bond program

Business deduction for work-related education

Scholarships, Fellowship Grants, Grants, and Tuition Reductions

Individual retirement arrangements (IRAs)

Higher education emergency grants

American Opportunity Credit

Key limits and requirements

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For the latest information about developments related to Pub. 970, such as legislation enacted after it was published, [go to](go to IRS.gov/Pub970)[ ](go to IRS.gov/Pub970)[IRS.gov/Pub970](go to IRS.gov/Pub970) . | | --- | | What’s New for Tax Year 2025
Trump accounts and new Form 4547. Recent legislation allows parents, guardians, and other authorized individuals to elect to establish a new type of individual retirement account, called a Trump account, for the exclusive benefit of certain children. If the child was born after 2024 and before 2029, is a U.S. citizen, and meets certain other requirements, the authorized individual may also elect to receive a $1,000 pilot program contribution to the child’s Trump account. Both elections can be made on Form 4547, which can be filed at the same time as the authorized individual’s 2025 income tax return. For more information on Trump accounts, and to learn how to make these elections, see Form 4547 and its instructions.
Student loan interest deduction. For 2025, the amount of your student loan interest deduction is gradually reduced (phased out) if your MAGI is between $85,000 and $100,000 ($170,000 and $200,000 if you file a joint return) . You can’t claim the deduction if your MAGI is $100,000 or more ($200,000 or more if you file a joint return) . See chapter 4 .
Education savings bond program. For 2025, the amount of your education savings bond interest exclusion is gradually reduced (phased out) if your MAGI is between $99,500 and $114,500 ($149,250 and $179,250 if you file a joint return) . You can’t exclude any of the interest if your MAGI is $114,500 or more ($179,250 or more if you file a joint return) . See chapter 9.
Business deduction for work-related education. Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2025, through December 31, 2025, is 70 cents a mile. See chapter 11. | | 1. | | --- | | Scholarships, Fellowship Grants, Grants, and Tuition Reductions | | Reminders
Individual retirement arrangements (IRAs). You can set up and make contributions to an IRA if you receive taxable compensation. A scholarship or fellowship grant is generally taxable compensation only if it is shown in box 1 of your Form W-2, Wage and Tax Statement. However, for tax years beginning after 2019, certain non-tuition fellowship and stipend payments not reported to you on Form W-2 are treated as taxable compensation for IRA purposes. These include amounts paid to you to aid you in the pursuit of graduate or postdoctoral study and included in your gross income under the rules discussed in this chapter. Taxable amounts not reported to you on Form W-2 are generally included in gross income, as discussed later under Reporting Scholarships and Fellowship Grants. For more information about IRAs, see Pub. 590-A and Pub. 590-B.
Higher education emergency grants. Emergency financial aid grants under the following are not included in your gross income.
• The CARES Act.
• The Coronavirus Response and Relief Supplemental Appropriations Act, 2021.
• The American Rescue Plan Act of 2021.
Also, for purposes of the American opportunity credit (see chapter 2) and lifetime learning credit (see chapter 3), a student does not reduce an amount of qualified tuition and related expenses by the amount of an emergency financial aid grant. For more information, see Higher Education Emergency Grants Frequently Asked | | Questions on [IRS.gov](IRS.gov). | | 2. | | --- | | Americ

FAQs

What changes were introduced for Tax Year 2025 regarding Trump accounts?

Recent legislation allows authorized individuals to elect to establish a Trump account for certain children. If the child meets defined conditions, the authorized individual may also elect a $1,000 pilot program contribution using Form 4547, filed with the 2025 income tax return.

How do MAGI limits affect the 2025 student loan interest deduction and education savings bond interest exclusion?

The student loan interest deduction is phased out if MAGI falls between $85,000 and $100,000 (or $170,000 to $200,000 jointly) and cannot be claimed at or above the upper thresholds. The education savings bond interest exclusion is phased out between $99,500 and $114,500 (or $149,250 to $179,250 jointly) and cannot be excluded at or above the upper thresholds.

What key eligibility rules apply to the American Opportunity Credit for 2025?

The credit is up to $2,500 per eligible student and includes an income threshold ($180,000 joint; $90,000 single/head of household/qualifying surviving spouse). Eligibility also requires certain postsecondary enrollment timing in 2025 (or early 2026 if paid in 2025), at least half-time enrollment for an academic period beginning during 2025, and limits such as availability only for a maximum of four tax years and restrictions based on completing the first four years before 2025.

Sep 2, 2026

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