I am confused as to why I'm not getting back all of the money that I paid into my tuition.

[PeterM · Accepted solution]

The IRS doesn't refund your tuition costs, but they will give you education credits that directly decrease your tax liability.

The main difference between getting a deduction and receiving a tax credit is that a deduction lowers your income that is subject to tax whereas the tax credit lowers the tax itself. The following is a list of credits and deduction available...

American Opportunity Credit

The American Opportunity Credit can save you up to $2,500 in tax for the education expenses of each eligible student. To qualify, the student must pursue a degree at a school that is eligible to participate in the federal student aid program. The credit is only available to students in their first four years of attendance, who enroll at least half time for one academic period during the tax year and do not possess a felony drug conviction.

The credit amount includes the costs you incur for tuition, fees and course-related books, supplies and equipment necessary to attend the institution. If the credit amount exceeds the amount of tax you owe, you can receive up to $1,000 of the credit as a refund.

Lifetime Learning Credit

Lifetime Learning Credits are available to all taxpayers who attend at least one course during the year at an institution eligible to participate in the federal student aid program. It is not necessary that the student pursue a degree or certification to qualify, and it's available for any year of study. The credit covers the cost of tuition and fees plus any amount for books and supplies you are required to purchase directly from the school.

This credit is of particular value to those students attending postgraduate programs. As of 2016, the maximum benefit of the credit is $2,000. However, the lifetime learning credit is nonrefundable if it exceeds your tax bill for the year.

Tuition deductions

If you prefer to claim a deduction for your school expenses rather than a credit, the IRS allows you to deduct some of your tuition and fee payments. Since this is not an itemized expense, anyone can take the deduction. One thing to keep in mind is that you can never claim more than one educational tax benefit per student, per year. You cannot claim a tuition deduction and a tax credit in the same year for the same student.

[klacane8697]

I filed my 1098-T and I qualified for a $4k tax deduction. In my refund, why isn't that in my tax return?

[Hal_Al]

The $4000 Tuition & Fees Deduction (TFD) is only a deduction from income, before tax is calculated. For example, if you are in the 12% tax bracket, you save $480 ( 4000 x 12% = 480).

Or did you mean you used $4000 of expenses to claim the AOC credit.  The AOC ia a maximum of $2500

The $2500 American opportunity credit (AOC) is a dollar for dollar reduction in tax.  If you have less than $2500 in tax liability, you will only get up to $1000 of that as a refundable credit (direct refund).