American Opportunity Tax Credit

The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. 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% 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.

Who is eligible?

To be eligible for AOTC, the student must:

  • Be 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 have finished the first four years of higher education at the beginning of the tax year.
  • Not have claimed the AOTC or the former Hope credit for more than four tax years.
  • Not have a felony drug conviction at the end of the tax year

Claiming the credit

To be eligible to claim the AOTC or the lifetime learning credit (LLC), the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign. Qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. Make sure you are qualified before claiming the credit and make sure you keep copies of all the documents you used to find out if you qualify and determine the amount of your credit.

Income limits for AOTC

  • To claim the full credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly).
  • You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).
  • You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).

Lifetime Learning Credit

The lifetime learning credit (LLC) is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate, and professional degree courses — including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.

The amount of the credit is 20 percent of the first $10,000 of qualified education expenses or a maximum of $2,000 per return. The LLC is not refundable. So, you can use the credit to pay any tax you owe but you won’t receive any of the credit back as a refund.

Who is eligible?

To claim the LLC, you must meet all three of the following:

  1. You, your dependent or a third party pay qualified education expenses for higher education.
  2. You, your dependent or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution.
  3. The eligible student is yourself, your spouse or a dependent you listed on your tax return.

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 to get or improve job skills.
  • Be enrolled for at least one academic period* beginning in the tax year.

Claiming the credit

Just like the AOTC, to be eligible to claim the LLC, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign. 

Income limits for LLC

  • The amount of your LLC is gradually reduced (phased out) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).
  • You can’t claim the credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).

Be sure to consult with your tax professional to analyze your specific tax situation. At Taxperts, we can assess your small business structure and suggest ways to increase your savings. Check out our website, Facebook page, or LinkedIn page to learn more.

Receive the latest news

Subscribe To Our Newsletter

Get notified about new articles

We offer an accounting newsletter with timely tips for growing your business.

Select list(s) to subscribe to


By submitting this form, you are consenting to receive marketing emails from: Taxperts Accounting Services PC CPA. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact