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Student Education Tax Credits

Taxes and
Education

There are two major education tax credits available to students to help offset the costs of higher education: The American Opportunity Credit and the Lifetime Learning Credit. Tax credits are frequently more valuable than tax deductions because credits reduce your tax bill dollar-for-dollar, while deductions only reduce your taxable income.

The American Opportunity tax credit is a partially refundable tax credit, as it allows for up to 40 percent of the credit as a tax payment if you qualify to claim this credit for education expenses. When you prepare and e-File your taxes, the eFile.com tax app will separately calculate the refundable and nonrefundable portion of your education credits on Form 8863 for you so that you can e-File it with your return: eFileIT

The American Opportunity Credit (formerly The Hope Credit)

Of the two education credits currently available, the American Opportunity Credit is the most valuable. The American Opportunity Credit is an expanded version of the Hope Credit. Here is what you need to know about the American Opportunity Credit:

  • The American Opportunity Credit applies only to the first four years of post-secondary school education (university, college, vocational school, nonprofit and for-profit institutions)
  • You can claim up to $2,500 per eligible student, per year.
  • The credit covers 100% of the first $2,000 of qualified tuition, required fees, and qualified expenses, plus 25% of the next $2,000.
  • 40% of the credit is refundable, so you may receive $1,000 per eligible student as a tax refund even if you owe no tax.
  • Each student for which you claim the credit must have been enrolled at least half time for at least one academic period which began during the Tax Year.
  • For Tax Year 2019, the limit on modified adjusted gross income (MAGI) is $180,000 if Married Filing Jointly and $90,000 if Single, Head Of Household, or Qualifying Widow(er). ($160,000 and $80,000 for tax year 2018).
  • You may claim the credit for education expenses you paid for yourself, your spouse, or your dependent; but you may not take the credit for yourself if you are claimed as someone else's dependent.
  • Qualified expenses include tuition and required fees, books, supplies, equipment, and other required course materials (but not room and board).
  • Any felony drug convictions by the end of the tax year disqualify the student from receiving the American Opportunity Credit.

The Lifetime Learning Credit

If you, your spouse, or your dependent do not qualify for the American Opportunity Credit, you may still be able to claim the Lifetime Learning Credit. The Lifetime Learning Credit is a non-refundable tax credit. Here is what you need to know about this education credit:

  • The Lifetime Learning Credit applies to undergraduate, graduate, and professional degree courses, and even to post-graduate courses that help improve your job skills.
  • You can claim up to $2,000 per eligible student, per year.
  • The credit is available for any and all years of post-secondary education, and also for adult and continuing education courses. There is no limit on how many years you can claim the credit.
  • There is no minimum enrollment requirement.
  • The amount of your credit will be 20% of the first $10,000 of combined post-secondary tuition and fees you paid, totaling no more than $2,000 (per year, not per student).
  • For 2019, the full credit limit on modified adjusted gross income (MAGI) is $136,000 if Married Filing Jointly; $68,000 if Single, Head Of Household, or Qualifying Widow(er). ($110,000 and $55,000 for Tax Year 2018)
  • The Lifetime Learning Credit is not refundable, so it will not be paid to you in a refund--it simply decreases your tax liability.
  • You may claim the credit for qualified expenses you paid for yourself (if you were not claimed as a dependent), your spouse, or your dependent.
  • Qualified expenses include tuition, fees, books, supplies, equipment, and other course materials as long as they are required (room and board is not included).
  • Felony drug convictions do not make the student ineligible for the Lifetime Learning Credit.

You cannot claim both the Lifetime Learning Credit and the American Opportunity Credit for the same student in the same year, but you can claim one credit for one student and the other credit for another student. Remember that the American Opportunity Credit is generally the more valuable tax credit, but it is only good for the first four years of higher education, and has stricter enrollment requirements. If you qualify for the Lifetime Learning Credit, you can claim it any number of years (but there is a tighter income restriction). When you prepare your return on eFile.com, we will help you to know which education credit or deduction you qualify for, and which one will be the most beneficial to you. We will then generate the correct forms for you in order to claim the education credit or deduction(s) with your return.

Example: You could claim the American Opportunity Credit for each of your two children, and also claim the Lifetime Learning Credit for yourself and for your spouse. Or you could claim the American Opportunity Credit for all four of you, if you all qualified. But you can't claim both credits for the same person in the same year.

To be able to claim the American Opportunity Tax Credit or the lifetime learning credit (LLC), you must have received the Form 1098-T Tuition Statement, for you or your dependent from an eligible educational institution either in the U.S. or abroad. You or your dependent should typically receive the 1098-T form by January 31. When you prepare your return on eFile.com, you will be able to enter the information right from your 1098-T and we will generate the forms necessary to claim either education credit on your tax return.

Eligible Educational Institution

An eligible educational institution is a school offering higher education beyond high school. It is any college, university, trade school, or other post secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education. This includes most accredited public, nonprofit and privately-owned–for-profit postsecondary institutions. If you are not sure if your school qualifies, you can ask or see if your school is listed here.

Related Student Tax Topics

Review our student tax guide.

Learn about tax deductions for students.

Find out about tax-free college savings plans.

Learn about other tax credits and tax deductions you may qualify to claim on your return.

Use our free tax tools to calculate taxes or determine eligibility for certain tax credits.

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