Feeling the Pinch of Tuition? These Tax Credits Might Be Your New Best Friend

Paying for education might feel like trying to empty the ocean with a teaspoon, but there’s a bright spot on the horizon: education tax credits. Before you let the costs of textbooks and tuition get you down, learn how the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) can help turn your financial frown upside down.

Eligibility Requirements

To be eligible for either the AOTC or the LLC, the following criteria must be met:

• The taxpayer, their spouse, or their dependents must take post-high school coursework in the tax year 2024.
• The student must have a Form 1098-T, Tuition Statement, from an eligible educational institution. There are exceptions for certain students, which should be reviewed in detail.

American Opportunity Tax Credit (AOTC):

• Maximum Benefit: Up to $2,500 per eligible student.
• Availability: Only for the first four years at an eligible college or vocational school.
• Eligibility: Students must be pursuing a degree or other recognized education credential.
• Refundability: Partially refundable, with up to $1,000 back.

Lifetime Learning Credit (LLC):

• Maximum Benefit: Up to $2,000 per tax return, per year, regardless of the number of students who qualify.
• Availability: For all years of postsecondary education and for courses aimed at acquiring or improving job skills.
• Duration: Available for an unlimited number of tax years.

Double Benefits

Taxpayers cannot claim both credits for the same student in the same tax year. Additionally, expenses used to claim either credit cannot be used to claim a tax deduction for tuition and fees or any other education tax benefit.

Expenses Covered

Qualified education expenses for both credits include:

• Tuition
• Fees
• Course materials

The AOTC covers course materials even if not paid to the institution directly.

Claiming the Credits

To claim either the AOTC or the LLC, taxpayers must complete Form 8863, Education Credits, and file it with their federal tax return. This form ensures that you provide all necessary information to claim the credits you are eligible for.

Comparison Chart—Compliments of the IRS

Criteria	AOTC	LLC
Maximum Benefit	Up to $2,500 per eligible student	Up to $2,000 per return
Refundable/Nonrefundable	40% refundable (up to $1,000)	Not refundable
MAGI Limit (Married Filing Jointly)	$180,000	$180,000
MAGI Limit (Single, Head of Household)	$90,000	$90,000
Years of Post-Secondary Education	First 4 years	Unlimited
Number of Tax Years Available	4 years	Unlimited
Program Requirement	Must pursue a degree or recognized credential	No degree required
Course Load	At least half-time for one academic period	One or more courses
Felony Drug Convictions	No felony drug convictions	No restrictions
Qualified Expenses	Tuition, fees, course materials	Tuition, fees
Eligible Students	You, spouse, dependents	You, spouse, dependents
Who Can Pay Expenses	You, spouse, student, third party	You, spouse, student, third party
Required Forms	Form 1040 Schedule 3, Form 8863	Form 1040 Schedule 3, Form 8863

By thoroughly reviewing and understanding these education tax credits, taxpayers can make informed decisions and potentially reduce their tax liabilities significantly. Always ensure to consult the latest IRS guidelines or a tax professional for personalized advice.

For further comparison and detailed information, taxpayers can visit:

• Compare Education Credits
• Tax Benefits for Education: Information Center