Tax Credits Information
American Opportunity Tax Credit
The American Opportunity credit (AOTC) allows taxpayers to claim a credit up to $2,500 for qualified education expenses paid for each eligible student for the first four years of higher education. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax.
If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.
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. 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.
- Who is Eligible for AOTC?
An eligible student is either the taxpayer, taxpayer’s spouse, or a dependent who is claimed as an exemption on the taxpayer’s tax return and the student meets the following:
- 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 finished with the first four years of higher education at the beginning of the tax year
- Have not claimed the AOTC or the former Hope credit for more than four tax years
- Does not have a felony drug conviction at the end of the tax year
- How does one claim the Credit?
Students should receive a Form 1098-T Tuition Statement by January 31st. This statement helps identify your credit. The form will have an amount in either box 1 or 2 to show the amounts received or billed during the year.
To claim AOTC, you must complete the Form 8863 and attach the completed form to your Form 1040 or Form 1040A.
Lifetime Learning Credit
The Lifetime Learning Credit (LLC) allows taxpayers to claim a maximum credit of up to $2,000 per tax return for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate, and professional degree courses, including courses taken to acquire or improve job skills.
- Who can claim the LLC?
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
- Who is an eligible student for LLC?
To be eligible for LLC, the student must:
- Be enrolled or taking courses at an eligible educational institution
- Be taking higher education course or courses to get a degree or other recognized education credential, or improve job skills
- Be enrolled for at least one academic period beginning in the tax year