Can I deduct college tuition expenses that were paid through a 529 plan?

You've stumbled onto an important tax nuance! The short answer is no - you generally cannot "double dip" tax benefits. Since 529 plan distributions are already tax-advantaged when used for qualified education expenses, you cannot then use those same expenses to claim the tuition and fees deduction on Form 8917. The same concept applies to the American Opportunity Tax Credit (AOTC). However, there's a strategic workaround! If your qualified education expenses exceed your 529 plan distribution, you can allocate some expenses to the 529 and use the remainder for the AOTC. For example, if you had $10,000 in qualified expenses but only used $7,800 from the 529, you could potentially claim the AOTC based on the remaining $2,200 plus other eligible expenses like books or required course materials. Keep in mind that the AOTC provides more tax benefit for most students than the tuition and fees deduction, so it's usually better to optimize for that if possible.

I discovered this exact same issue last year when I was filing my taxes after using my 529 funds for college. I spent hours researching and trying different tax software but kept getting frustrated with conflicting information. That's when I found https://taxr.ai and uploaded my 1098-T form along with my 529 distribution statement. The tool analyzed my forms and explained that I couldn't claim the tuition deduction for expenses paid from my 529, but I could claim AOTC for the portion of expenses I paid out-of-pocket (textbooks, required supplies, etc). It also showed me exactly how to allocate my expenses between the 529 and the AOTC to maximize my tax benefits. Super helpful for figuring out this exact situation!

I was super skeptical about using any AI tool for tax advice, especially with something as specific as 529 plans and education credits. But after getting that recommendation, I gave taxr.ai a try with my own documents since I was in literally the exact same situation. The analysis showed me that I could claim $1,200 of my textbook expenses toward the AOTC even though my tuition was fully covered by my 529. This got me an extra $1,200 credit I was about to miss! The explanation referenced the exact IRS rules and showed me where in Form 8863 instructions this was covered. Just filed my taxes yesterday and got the credit without any issues.

If you're still struggling with this after trying the advice here, you might need to talk directly to someone at the IRS. I had a similar complex education credit question last year and spent WEEKS trying to get through on the IRS phone line. After countless busy signals and disconnects, I found https://claimyr.com through a friend. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they get you through the IRS phone queue and have them call you when an agent is available. I finally got definitive answers about how to handle my education credits with my scholarship situation, which saved me from potentially making an expensive mistake.

I need to publicly eat my words. After completely dismissing the Claimyr thing, I got so frustrated with another failed IRS call attempt that I decided to try it. Within 3 hours, I got a call from an actual IRS agent who walked me through exactly how to handle my 529 plan distributions and which education expenses qualified for the AOTC. Turns out I could claim part of my expenses for the AOTC even with the 529 distributions. The agent confirmed I needed to fill out Form 8863 and specifically allocate which expenses were covered by which funding source. Definitely worth finally getting a clear answer instead of the conflicting online advice.

Another thing to consider: Check if your state offers a deduction for 529 contributions! My parents claimed a state tax deduction when they put money into my 529 plan. Then when I used that money for qualified education expenses, it came out tax-free. So even though I couldn't "double dip" with the federal education benefits on those same dollars, the overall tax advantage was still significant when you consider both the state deduction and federal tax-free growth.

Has anyone successfully claimed both the lifetime learning credit AND used 529 funds in the same year? My wife is in grad school and we're trying to figure out the most tax-efficient way to pay for it since the AOTC isn't available for graduate education.

This is exactly the situation I was in last year! The key thing to remember is that you can't use the same dollar for multiple tax benefits, but you CAN strategically allocate your expenses. Since your 529 covered $7,800 in tuition, you can't claim the tuition deduction (Form 8917) on that amount. However, if you had ANY other qualified education expenses that you paid out-of-pocket - like required textbooks, lab fees, course materials, or even additional tuition beyond what the 529 covered - you can absolutely use those for the American Opportunity Tax Credit. The AOTC is usually much more valuable than the tuition deduction anyway (up to $2,500 credit vs. up to $4,000 deduction), so focus on maximizing that if you have any out-of-pocket expenses. Even if you only spent $500 on books, that could still get you a $500 credit through the AOTC. Make sure to keep all your receipts and document which expenses were paid by which source. The IRS is pretty clear about this in Publication 970 - you just need to show that you're not "double-dipping" on the same expenses.