The information in this article is up to date for tax year 2024 (returns filed in 2025).
The cost of attending college courses can be significant, but there are several tax credits for college students to help offset the expenses for this new chapter. Here’s an overview of education-related tax credits like the American Opportunity Tax Credit, Lifetime Learning Credit, and other deductions to know as you head down the path to higher education.
What education tax credits are available for college students?
The two most common education credits are the American Opportunity Tax Credit and the Lifetime Learning Tax Credit. These credits are available to those pursuing higher education and may assist in offsetting the cost by reducing your tax bill.
In addition, if the credit reduces your tax liability to zero and it’s refundable, you may be eligible to receive a refund for the remaining credit amount.
What is the American Opportunity Tax Credit (AOTC)?
The American Opportunity Tax Credit (AOTC) is a tax credit for college students and families that can reduce the financial burden of higher education costs. This tax credit can benefit those in their first four years of post-secondary education.
The AOTC is a tax credit worth up to $2,500 per year for an eligible college student. It is refundable up to $1,000. To qualify for the AOTC, students must be enrolled at least half-time in an eligible degree or certificate program at a qualified institution.
If you are a college student filing your own return, you may claim this credit a maximum of four times (i.e., once per year for four years). If you are a parent of a college student, you can take this tax credit four times per eligible dependent.
The education expenses that qualify for these credits include tuition and fees required for enrollment. If you claim the American Opportunity Tax Credit, you can also count the cost of books, supplies, and other equipment necessary for your course of study.
Room and board, insurance, health fees, transportation, and living expenses do not qualify for the tax credit.
Requirements to claim the American Opportunity Credit
To qualify for the American Opportunity Tax Credit, a college student must:
- Be pursuing a degree or other recognized education credential
- Be enrolled at least half time for an academic period during the tax year
- Not have finished the first four years of college at the beginning of the tax year
- Not have already claimed the AOTC on four prior tax returns
- Not have a felony drug conviction at the end of the tax year
There is an income threshold for the AOTC. To get the full credit amount, your modified adjusted gross income (MAGI) must be less than $80,000 (or $160,000 if you are married filing jointly). If your MAGI is above $80,000, you will receive a reduced amount, and if it’s over $90,000, you won’t be able to claim the credit at all.
What is the Lifetime Learning Credit?
The Lifetime Learning Credit is worth up to $2,000 per year for each eligible student. The number of years you can claim the credit is unlimited, and there is no minimum enrollment requirement to qualify for the Lifetime Learning Credit. In other words, you don’t need to be enrolled full-time to be eligible.
If you are a college student and no one claims you as a dependent, you can file your own return and take this credit. If you are the parent of a student you claim as a dependent, you can take this credit on your income tax return.
You must have incurred certain education-related expenses to qualify for the Lifetime Learning Credit. The costs that eligible students can claim include:
- Tuition and fees: Tuition and fees include the amount you pay for your courses as long as the institution is eligible (typically accredited universities and colleges).
- Course materials: The costs of books, supplies, and equipment necessary for your courses can also qualify. For example, art supplies for a studio class or software for computer courses could be considered course materials.
This credit does not cover expenses such as transportation, room, and board, or any fees that are not directly related to course materials and tuition.
Requirements to claim the Lifetime Learning Credit
To claim the Lifetime Learning Credit (LLC), you must meet the following requirements:
- You, your dependent, or your spouse must pay qualified tuition and related expenses for higher education.
- The education expenses must be for an eligible student enrolled at an eligible educational institution.
An eligible student for the Lifetime Learning Credit can be you, your spouse, or a dependent listed on your return, and they must:
- Be enrolled or taking courses at an eligible educational institution.
- Be taking higher education courses aimed at obtaining a degree or recognized credential, or courses to acquire or improve job skills.
- Be enrolled for at least one academic period that begins in the tax year (this can include semesters, trimesters, quarters, or other study periods).
There are income limits to claiming the Lifetime Learning Credit. This credit begins to phase out if your modified adjusted gross income (MAGI) is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). The credit is unavailable to taxpayers whose MAGI is more than $90,000 ($180,000 or more if you file a joint return).
American Opportunity Credit vs. Lifetime Learning Credit
Understanding whether the American Opportunity Tax Credit or Lifetime Learning Credit will benefit you the most is important. While you can claim both credits on your tax return, you cannot claim them for the same eligible student or the same qualifying expenses. Some notable differences between the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) include:
Maximum benefit
- AOTC – Up to $2,500 credit per eligible student
- LLC – Up to $2,000 credit per return
Refundability
- AOTC – 40% of the credit is refundable
- LLC – non-refundable
Number of tax years the credit is available
- AOTC – 4 tax years per eligible student
- LLC – Unlimited
Type of program required
- AOTC – Students must be pursuing a degree or other recognized education credential
- LLC – Students does not need to be pursuing a degree or other recognized education credential
The IRS outlines additional differences and similarities between the American Opportunity Tax Credit and the Lifetime Learning Credit, which can help you determine which credit best suits your tax situation.
Which education credit should I take?
Some students will qualify for the AOTC and the Lifetime Learning Credit, but the IRS won’t let you take both. Typically, undergraduate students who qualify for both credits will take the AOTC because it is worth more and it is refundable.
The Lifetime Learning Credit is best suited for graduate students because there is no limit to the number of years you can claim it. Undergraduate students taking only a few courses are also more likely to take the Lifetime Learning Credit because there is no minimum enrollment requirement.
How do I claim an education credit?
To claim an education credit, you’ll fill out Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), when you file your tax return. This form will help you determine your eligibility and calculate the amount of the credit.
You will need to use Form 1098-T from the school to complete Form 8863. Your 1098-T shows how much was paid for tuition and qualified expenses. If you don’t have a 1098-T, you can always request one, but not all schools are required to provide them. If your institution doesn’t send you a 1098-T, you will still need a record of enrollment and what was paid for tuition and expenses.
When you file your taxes with TaxSlayer, our software will guide you through the steps for claiming your education tax credit. College students filing with a simple tax situation may qualify to file a free federal tax return online. With TaxSlayer Simply Free, your education credits and the student loan interest deduction are included.
Who should claim an education credit, the parent or the student?
If you are a college student and no one claims you as a dependent, you can claim the credit. But if you are the parent of a college student who you claim as a dependent, you will take the tax credit for yourself.
Frequently asked questions about tax credits for college students
Who qualifies for education tax credits?
When filing your return, you need to choose an education credit to claim – either the Lifetime Learning Credit or American Opportunity Credit. You are able to claim both credits on a single return, however you cannot claim both credits for the same eligible student or expense. Although there are further requirements, all of the following must be true to qualify for either credit:
- The eligible student must be you, your spouse, or a dependent listed on your tax return.
- You, your dependent, or a third party pays qualified education expenses for higher education.
- An eligible student must be enrolled at an eligible educational institution.
How much can I deduct for student loan interest?
The student loan interest deduction is another tax break offered to college students or parents paying for college. It can be taken in addition to an education tax credit. If you meet all the requirements for the student loan interest deduction, you may claim up to $2,500 for interest paid on your student loans.
Do I have to claim the same credit for two different dependents?
No, you don’t have to claim the same credit for two different dependents. Say you have two kids in college. You can claim the AOTC for one dependent and the Lifetime Learning Credit for the other dependent during the same tax year.
Note, you just can’t take both credits for the same dependent.
Can international students claim education tax credit?
Generally, international students looking for education related tax breaks, who are in the U.S. on an F-1 Student Visa will not be eligible to claim education tax credits. In addition, if the taxpayer or spouse on the return was a non-resident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes, education tax credits cannot be claimed.
How does the GI Bill affect my education tax credits and deductions?
If you paid for qualified education expenses with a GI bill or other payments from the Department of Veterans Affairs (VA), you shouldn’t claim any deductions or credits for those expenses covered by your tax-free assistance. Only write off expenses that are paid out of pocket.
