For any of your college books to be deductible, they must be required by the school for your courses. This means only the books on the required reading list for your classes count for any of the income tax benefits for higher education costs. For example, if your professor requires you to purchase a textbook and workbook for class, both qualify. But if you purchase an additional study aid that isn't required, you don't get to deduct it no matter how much it helps you in the class.
Tuition and Fees Deduction
If you want to claim the tuition and fees deduction, only books you are required to purchase through the school qualify for the write-off. If you are given the option of purchasing the books elsewhere, you can't claim the costs as part of the deduction -- even if you purchase them through the school. For example, suppose you're required to purchase "Accounting Basics" for your class, but you have the option to purchase it from the school bookstore or elsewhere. In this case you can't deduct the cost because you can buy it somewhere other than the school bookstore. The same rule applies if you're claiming the Lifetime Learning Credit. As of publication, this credit is for up to $10,000 of postsecondary expenses, including tuition, fees and required supplies. Your income must fall under the annual limit, but there's no requirement that you be taking a certain number of courses or that you can only claim the credit a certain number of years.
American Opportunity Credit
The American Opportunity Tax Credit permits you to include the cost of the book regardless of where you purchase it. For example, if "Accounting Basics" costs $150 in the bookstore, but you buy it from an upperclassman for $60, you can still claim the cost. The American Opportunity Credit is a credit for 100 percent of your first $2,000 of qualifying expenses, including tuition and required fees and supplies, and 25 percent of your next $2,000 of expenses. However, it can only be claimed for up to four years of undergraduate study if you're enrolled at least half-time, you are pursuing a degree, and your income falls below the annual limits.
Comparing Tax Breaks
The tuition and fees deduction, Lifetime Learning Credit and American Opportunity Credit are all mutually exclusive tax breaks -- you can only claim one of the three each year. To maximize your tax refund, or at least minimize your liability, consider running your tax return multiple times, claiming each deduction separately, to see which one saves you the most money. You're not locked in from year to year. If the American Opportunity Credit saves you the most this year, you're still allowed to claim the tuition and fees deduction the next year if it saves you the most money.