What Are Education Tax Credits?

Education tax credits can help offset the cost of higher education. Learn more about how they work and see if you qualify.

Checkout this video:

Education Tax Credits

Education tax credits can help you save money on your taxes if you have educational expenses. There are two education tax credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit. You can claim both credits if you have qualifying expenses, but there are some differences between the two.

The American Opportunity Tax Credit

The American Opportunity Tax Credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. The credit is worth up to $2,500 per eligible student.

To claim the full amount of the credit, you must have paid at least $4,000 in qualifying tuition, fees and other expenses for the student during the tax year. 40% of the credit (up to $1,000) is refundable, which means you can receive it even if you do not owe any taxes.

To be eligible, the student must be enrolled at least half-time in a program leading to a degree or other recognized educational credential at an eligible educational institution. The student cannot have finished the first four years of college before the beginning of the tax year. Also, the student cannot have claimed the American Opportunity Tax Credit or Hope Scholarship Credit for more than four tax years.

There are income limits that phase out the credit completely for taxpayers with modified adjusted gross incomes above certain amounts. For 2019, these amounts are $80,000 for single filers and $160,000 for joint filers.

The Lifetime Learning Credit

The Lifetime Learning Credit is worth up to $2,000 per tax return, and it can be used for an unlimited number of years. There are no limits on the amount of tuition and fees that can be paid for with this credit. In order to claim the Lifetime Learning Credit, you must:

– Have paid qualified education expenses for yourself, your spouse, or a dependent
– Be enrolled in at least half-time status at an eligible educational institution
– Not have claimed the American Opportunity Tax Credit or Hope Scholarship Credit for the same student in the same year

To claim the Lifetime Learning Credit, you must file Form 8863 with your tax return.

Qualifications for Education Tax Credits

The lifetime learning credit and the American opportunity credit are tax credits available to taxpayers who pay eligible education expenses for themselves, their spouses, or their dependent children. To qualify for either of these education tax credits, the taxpayer, the taxpayer’s spouse, or the dependent child must be enrolled at an eligible educational institution. The educational institution must also be accredited by the U.S. Department of Education or be a member of the Council for Higher Education Accreditation.

The American Opportunity Tax Credit

To be eligible for the AOTC, you must:
-Have paid qualifying education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your federal tax return
-Be enrolled in a program leading to a degree or other recognized credential at least half-time for at least one academic period beginning in the tax year
-Not have finished the first four years of post–secondary education before the beginning of the tax year
-Not have claimed the AOTC or its predecessor, the Hope Scholarship Credit, for more than four tax years
-Not have a felony drug conviction at the end of the tax year

The Lifetime Learning Credit

The Lifetime Learning Credit is a tax credit for eligible taxpayers who are paying for undergraduate, graduate, or professional degree courses, or courses to acquire or improve job skills. The credit is worth up to $2,000 per year, per taxpayer. To qualify, taxpayers must have paid tuition and other eligible expenses for themselves, their spouse, or their dependent.

How to Claim Education Tax Credits

The American Opportunity Tax Credit and the Lifetime Learning Credit are education tax credits that can help offset the cost of tuition and other related expenses. To claim either of these credits, you will need to fill out Form 8863 and submit it with your tax return. Let’s take a look at how to claim these credits.

The American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is a tax credit for individuals and families who pay for college tuition, fees and other related expenses. The AOTC is worth up to $2,500 per eligible student. To claim the credit, you must fill out Form 8863 and submit it with your tax return.

To be eligible for the AOTC, you must:
-Be pursuing a degree or other recognized education credential at an eligible institution
-Have not completed more than 30 semester hours or the equivalent before the beginning of the tax year
-Not have claimed the AOTC or its predecessor, the Hope Scholarship Credit, for more than four tax years
-Not have a felony drug conviction on your record at the end of the tax year

In addition, you must be enrolled in school at least half-time for one academic period beginning in the tax year. And you or your family must not have been claimed as dependents on someone else’s tax return.

The Lifetime Learning Credit

The Lifetime Learning Credit is a federal tax credit that helps with the costs of higher education. The credit can be used for an unlimited number of years and is worth up to $2,000 per taxpayer, per year. The Lifetime Learning Credit is available to both undergraduate and graduate students, and there is no limit on the number of credits that can be taken. To qualify, taxpayers must have an income of less than $60,000 if filing single or $120,000 if filing jointly.

Scroll to Top