Education Credit

There are two education credits available. You may only use one in any given year for each eligible student. The American Opportunity Credit and the Lifetime Learning Credit have several elements in common.

You can claim the credit if:
  • You pay the qualified education expenses for a student attending an eligible education institution.
  • The student is yourself, your spouse, or a dependent for whom you can claim an exemption on your return.

You cannot claim the credit if:
  • Your filing status is married filing separately.
  • You are listed as a dependent on another person's tax return.
  • Your Modified Adjusted Gross Income (MAGI) is $180,000 or more ($90,000 or more if not filing a joint return) for the American Opportunity Credit.
  • Your Modified Adjusted Gross Income (MAGI) is $127,000 or more ($63,000 or more if not filing a joint return) for the Lifetime Learning Credit.
  • You or your spouse was a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes.

Qualified education expenses include tuition and student activity fees. Expenses for course related books, supplies, and equipment are included as qualified education expenses only if the expenses must be paid to the institution as a condition of enrollment or attendance. If the student may purchase these items elsewhere they are not qualified expenses.

An eligible education institution is a college, university, vocational school, or other postsecondary education institution eligible to participate in a student aid program administered by the Department of Education. Most accredited private, public, and for-profit postsecondary schools are included in this list.

You can claim an education credit for qualified education expenses paid with the proceeds of a loan. You can claim a credit for expenses not refunded when a student withdraws from school. Expenses paid by your dependent are considered as paid by you.

The institution should provide you with a 1098-T indicating the amount of qualified education expenses incurred in a given year. You determine the amount of your credit by completing Form 8863.

The American Opportunity Credit is up to $2,500 per eligible student. Up to 40% of it may be refundable.
Rules for the American Opportunity Credit:
  • It is available for the first four years per student.
  • The student must be pursuing an undergraduate degree or other recognized educational credential.
  • The student must be enrolled at least half time (as determined by the educational institution) for at least one academic period beginning during the year.
  • The student can have no felony drug convictions.

The Lifetime Learning Credit is 20% of the first $10,000 in qualified education expenses for a maximum credit of $2,000 per year. It has a broader scope than the American Opportunity Credit. The applicable rules:
  • It is available for all years of postsecondary education and for courses to improve or acquire job skills
  • It is available for an unlimited number of years.
  • The student does not need to be pursuing a degree or other credential.
  • There is no felony drug conviction rule.

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