Education tax credits: A guide for students
Two education tax credits can help you or your parents cover the cost of higher education: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). Either credit can help reduce how much taxpayers owe—potentially down to zero. But only the AOTC can go so far as to give eligible taxpayers a refund.
Even if you’re eligible for both the AOTC and the LLC, you can only claim one of the credits each year. However, you can learn how these credits work for the 2022 tax year—the return you file in 2023—and claim the credit that benefits you the most.
Key takeaways
- There are two education tax credits: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
- Both education tax credits can lower your tax liability, and the AOTC might increase your refund if you don’t owe anything.
- You can choose either credit if you qualify for both, but you can only claim one of the credits each year.
How education tax credits work
Education tax credits work like other types of tax credits by reducing how much you have to pay in taxes—or increasing your refund.
For example, if you owe $2,000 in income taxes and are eligible for a $1,000 credit from the AOTC, the tax credit will reduce your tax liability to $1,000.
Keep in mind that tax credits aren’t the same as tax deductions—like certain medical expenses and home improvements—which lower your taxable income.
How much can I claim with education tax credits?
The AOTC and the LLC are the only two education tax credits, and they can be worth up to $2,500 and $2,000, respectively. The AOTC is partially refundable, which means you can get up to $1,000 back as a refund if you don’t owe any taxes. The LLC is a nonrefundable tax credit, which means it can only reduce your tax liability to zero.
The amount you can claim will depend on whether you qualify for the tax credit and how much in eligible expenses you have from the tax year. You also can only claim the credit if no one else can claim you as a dependent.
AOTC vs. LLC
Here’s an overview of the main requirements and differences between the two education tax credits:
| AOTC | LLC | |
|---|---|---|
| Maximum credit amount | $2,500 per eligible student | $2,000 per tax return |
| Qualifying expenses | Tuition, required fees, and course-related books, supplies and equipment | Tuition and required fees, which only include books, supplies and equipment that you are required to buy from the school |
| The credit’s value | 100% of the first $2,000 in qualifying education expenses and 25% of the next $2,000 | 20% of the first $10,000 in qualifying education |
| Refundable portion | 40%, up to $1,000 | $0 |
| Qualifying programs | A degree, certificate or recognized educational credential program from an eligible educational institution | Any courses from an eligible educational institution |
| Required year in school | You must be in your first four years of higher education | N/A |
| How many classes do you need to take? | You must be enrolled at least half-time, based on your school’s standards, for at least one academic period | N/A |
| How many times can you claim the credit? | Up to four, including any times you claimed the Hope education tax credit | Unlimited |
| Maximum modified adjusted gross income | $180,000 if married filing jointly or $90,000 for other filing statuses | $180,000 if married filing jointly or $90,000 for other filing statuses |
| Criminal record requirements | You can’t have a federal or state felony conviction for possession or distribution of a controlled substance | N/A |
| Other requirements | Taxpayers and students must have a taxpayer identification number (TIN) and the school’s employer identification number (EIN). Students also must receive a Form 1098-T from the school. | Students must receive a Form 1098-T from the school. |
Eligibility requirements for education tax credits
The ATOC and LLC have different eligibility requirements, which include limitations on who can claim the credit and what types of educational programs and expenses qualify.
Who can claim the education tax credits?
Taxpayers can claim either one of the education tax credits if the taxpayer, their spouse or a dependent meets the requirements. However, you can’t claim either credit if you use the married filing separately filing status or if someone else can claim you as a dependent.
What are considered qualified educational expenses?
Tuition and required fees count as qualified educational expenses for both the AOTC and LLC—if the expenses are for an academic period that begins the same tax year or during the first three months of the next year. For example, expenses you paid for in 2022 must be for academic periods that start from January 2022 to March 2023.
Some common education-related expenses don’t qualify, including:
- Room
- Board
- Transportation
- Insurance
- Living expenses
- Fees that aren’t required to enroll or attend the program
You also can’t claim expenses that were paid for using tax-free educational assistance, such as tax-free portions of a scholarship or grant.
For the AOTC, you can include expenses for required books, supplies and equipment no matter where you buy them. However, for the LLC, you can only include those expenses when you’re required to purchase them and if you buy them from the educational institution.
What counts as an eligible educational institution?
For the AOTC and LLC, eligible educational institutions include colleges, universities, trade schools and other educational institutions that participate in federal student aid programs. Most accredited postsecondary institutions meet this requirement, and you can double-check in the Database of Accredited Postsecondary Institutions and Programs.
How do I get my education tax credit?
You can claim an educational tax credit when you file your federal tax return using Form 8863, Education Credits. You’ll also need a Form 1098-T, Tuition Statement from your school, which you’ll generally receive by the end of January.
It’s important to verify that you meet all the requirements for claiming tax credits. Filing a false tax return is a crime, and claiming the AOTC when you’re not eligible could result in getting banned from claiming the credit for up to 10 years.
If you’re unsure if you can claim an education tax credit, use the IRS’ interactive tool to figure out the answer in about 10 minutes.
Education tax credits in a nutshell
Education tax credits can help you offset some of the cost of higher education. Or if a parent claims you as a dependent, the credits can lower your parent’s tax liability for the year. Learn more about the cost of going to college and how you might be able to save money.
And, if you’re looking for more ways to save this tax season, learn more about other tax credits and deductions.
