Education Credits
The American Opportunity and Lifetime Learning credits are
available to individuals for out-of-pocket tuition expenses
incurred by students pursuing college degrees, graduate degrees or
vocational training.
The American Opportunity Credit
covers four years of post-secondary education, adds required course
materials to qualifying expenses, makes the credit available at
higher income levels, and increases the amount of the credit.
The Lifetime Learning Credit is
available to students attending a post-secondary educational
program and who are not eligible to take the American Opportunity
Credit. Either the American Opportunity Credit or the Lifetime
Learning Credit can be claimed for each eligible student, but you
cannot claim both in any year.
Each student can elect whether to claim the American Opportunity
or Lifetime Learning Credit, based on the credit with the most tax
benefit.
- The American Opportunity Credit is limited on a per-student
basis.
- The Lifetime Learning Credit is limited on a per-household
basis.
The tuition and fees deduction
is also available to eligible students. Either one of these credits
or the deduction, but not both, may be taken for any student in a
year.
American Opportunity
Credit
The American Opportunity Credit is worth up to $2,500 per
student for four years of post-secondary education. The credit is
40% refundable, up to $1,000, so it can benefit even those with no
tax liability.
For individual taxpayers, the American Opportunity Credit phases
out if modified adjusted gross income is between $80,000 and
$90,000. For married filing joint, the credit phases out if MAGI is
between $160,000 and $180,000.
Eligibility
- You must have paid qualified education expenses for yourself,
your spouse or your dependent.
- The student is completing the first four years of
post-secondary education at a qualified educational
institution.
- The student is attending school to obtain an undergraduate
degree or other recognized education credential.
- The student is enrolled for at least half-time of one academic
period that began in the tax year.
- The student has no felony drug convictions.
Determining the Amount of Credit
For each student, the amount of the credit equals the sum
of:
- 100% of the first $2,000 of qualified expenses paid for the
eligible student
- 25% of the next $2,000 of qualified expenses paid for the
eligible student
The maximum credit that can be claimed is $2,500 per student per
year.
For more information see IRS
Publication 970.
Lifetime
Learning Credit
The Lifetime Learning Credit provides a maximum non-refundable
tax credit of $2,000 per year for all students attending an
eligible educational institution in your household. The Lifetime
Learning Credit may be limited by your income and amount of
tax.
For individual taxpayers, the Lifetime Learning Credit phases
out if MAGI is between $51,000 and $61,000. For married filing
joint, the credit phases out if MAGI is between $102,000 and
$122,000. These limits are significantly lower than the American
Opportunity Credit.
Eligibility
- Any student enrolled in one or more courses at an eligible
educational institution.
- There are no requirement to be seeking a degree or to be
enrolled at least half-time.
- The institution can include nondegree programs to acquire or
improve job skills.
- There is no limit on the number of years you can claim the
credit.
Determining the Amount of Credit
- The amount of the Lifetime Learning Credit is 20% of the first
$10,000 paid for eligible education expenses for all eligible
students.
- The maximum amount of credit is $2,000 per household.
- The amount of the credit will be reduced or eliminated if you
exceed certain income levels.
Requirements to Claim American Opportunity or Lifetime Learning
Credit
- You paid qualified higher education expenses for an eligible
student.
- The eligible student is you, your spouse or a dependent for
whom you are claiming an exemption.
- The expenses were paid for the current tax year or the first
three months of the succeeding tax year.
- Your filing status is single, head of household, qualifying
widow(er) or married filing jointly.
- You cannot be claimed as a dependent on another person's tax
return.
- You can claim the American Opportunity Credit for each student
(taxpayer, spouse or dependent) on your return, but only one
Lifetime Learning Credit per return, regardless of the number of
students on the return. In addition, you may claim
either the American Opportunity Credit
or the Lifetime Learning Credit, but not both,
or you may claim the tuition and fees
deduction.
Qualifying Expenses
- Expenses are for tuition and related expenses required for
enrollment or attendance at an eligible educational
institution.
- An eligible educational institution is a college, university,
vocational school or other post-secondary educational institution
eligible to participate in a student aid program administrated by
the Department of Education.
- Related expenses include student activity fees, expenses for
course-related books, supplies, and equipment included in education
expenses. These expenses must be paid to the institution as part of
enrollment or attendance requirements. (Expenses for books and
course-related supplies are treated differently by each credit; see
the descriptions above for more information.)
- The expenses are not paid with a tax-free scholarship,
fellowship, grant or through an employer-provided education
assistance program. This includes Pell Grants and Veterans'
educational assistance.
Non-Qualifying Expenses
- Room and board
- Insurance
- Transportation
- Medical expenses
- Expenses related to sports, games, hobbies, and non-credit
courses, unless the course is required as part of the degree
program
American Opportunity vs. Lifetime Learning
Credit
| American Opportunity
Credit |
Lifetime Learning
Credit |
| Up to $2,500 per
eligible student |
Up to $2,000 credit per
return |
Available only
until the first four years of
post secondary education are completed.
|
Available for all years of post secondary
education and for courses to acquire or
improve job skills. |
Available only for
four years for each
eligible student. |
Available for an unlimited number of
years. |
| Student must be
enrolled at least half-time in at least one academic period during
the year |
Available for one or more
courses. |
| Student must not
have any felony drug convictions on record |
Felony drug conviction rule doesn't
apply. |
To claim either credit, complete Form
8863 and attach the form to your Form 1040 or Form
1040A.
For more
information see IRS Publication 970.