Are you or your dependents attending a college or university? If so, you may be able to claim an education credit on your return.
An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: The American Opportunity Tax Credit and The Lifetime Learning Credit.
Who can claim an education credit?
- There are additional rules for each credit, but you must meet all three of the following for both:
- 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.
- The eligible student is yourself, your spouse or a dependent you list on your tax return.
Who cannot claim an education credit?
- Someone else, such as your parents, list you as a dependent on their tax return
- Your filing status is married filing separately
- You already claimed or deducted another higher education benefit using the same student or same expenses.
- You (or your spouse) were a non-resident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes.
American Opportunity Tax Credit
The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student.
The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student. But, if the credit pays your tax down to zero, you can have 40 percent of the remaining amount of the credit (up to $1,000) refunded to you.
To be eligible for AOTC, the student must:
- Be pursuing a degree or other recognized education credential
- Be enrolled at least half time for at least one academic period beginning in the tax year
- Not have finished the first four years of higher education at the beginning of the tax year
- Not have claimed the AOTC or the former Hope credit for more than four tax years
- Not have a felony drug conviction at the end of the tax year
Lifetime Learning Credit
The Lifetime Learning Credit (LLC) is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses–including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.
To claim a LLC, you must meet all three of the following:
- You, your dependent or a third party pay qualified education expenses for higher education
- You, your dependent or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution
- The eligible student is yourself, your spouse or a dependent you listed on your tax return
There are a few more rules and limitations on these credits. If you believe you will be eligible for either of these credits, please let us know when we start your return.