Financial aid from the federal government doesn’t all come in the form of grants, loans, and work-study. You (or your parents) may also be eligible for tax credits each year that you pay to attend school, provided your (or your parent’s) income is below a certain level. Tax credits lower income tax and may even lead to refunds come April. There are two credits that can apply to federal income tax returns: the American Opportunity Credit and the Lifetime Learning Credit. You can claim only one of these credits each year per student. Learn about both, and pick wisely.

The American Opportunity Credit

This credit allows you to claim up to $2,500 per student per year for the first four years of enrollment in a degree-granting program for qualified educational expenses. Qualified expenses include tuition and fees, but do not include room and board, medical expenses, transportation, etc. Should the credit bring the amount of tax you owe to zero, you may receive 40% of the remaining credit as a refund.

• Eligibility: To claim this credit, the student must not have already completed their first four years of postsecondary education. That is to say, this credit can only be claimed if you or your dependent is an undergraduate student. The student must not have previously claimed the Hope Scholarship Credit (called the American Opportunity Credit after 2009) or the American Opportunity Credit for more than three years. The student must be enrolled in a degree- or certificate-granting program at least half-time. Additionally, the student cannot have a federal or state felony conviction for the possession or distribution of a controlled substance.
• Noneligibility: Individuals who fit one of the following descriptions are not eligible for the American Opportunity Credit.
  • Anyone whose modified adjusted gross income is over $180,000 (filing jointly) or $90,000 (filing single)
  • Students claimed as dependents on someone else’s tax return (students are likely claimed as dependents on their parents’ tax forms, so the parents can claim the credits, but the student cannot)
  • Couples who are married and filing separately
  • Nonresident aliens who have elected not to be treated as resident aliens when filing taxes

The Lifetime Learning Credit

This credit allows you to claim up to $2,000 per student per year for tuition, fees, books, and supplies purchased to attend college or vocational school. There is no limit to the number of years this credit can be claimed. The Lifetime Learning Credit may be applied to the outstanding balance of your taxes, but should it bring the balance to zero, none of the remaining credit will be refunded to you.

• Eligibility: The person who claims the credit must pay higher education expenses for an eligible student. The student must be enrolled in at least one course at an accredited institution for the purpose of pursuing a degree or certificate or improving job skills. Expenses include tuition, fees, books, supplies, and equipment but not insurance, medical expenses, room and board, transportation, or living expenses. The eligible student may be yourself, your spouse, or a dependent for whom you claim a tax exemption.
• Noneligibility: Individuals who fit one of the following descriptions are not eligible for the Lifetime Learning Credit.
  • Anyone whose modified adjusted gross income is over $132,000 (filing jointly) or $66,000 (filing single)
  • Students claimed as dependents on someone else’s tax return (students are likely claimed as dependents on their parents’ tax forms, so the parents can claim the credits, but the student cannot)
  • Couples who are married and filing separately
  • Nonresident aliens who have elected not to be treated as resident aliens when filing taxes
  • People who claim the American Opportunity Credit or a Tuition and Fees Deductions for the same student in the same year

Page last updated: 05/2018