Education Credits

 What are the education credits? 

There are two credits available, the American Opportunity Tax Credit and the Lifetime Learning Credit.

How does the Lifetime Learning Credit different from the American Opportunity Tax Credit? 

Unlike the American Opportunity Tax Credit: 

  • The Lifetime Learning Credit is not based on the student's workload. It is allowed for one or more courses.
  • Expenses for graduate level degree work are eligible. 
  • There is no maximum period for which the credit can be claimed for each eligible student. 
  • The amount you can claim as a credit does not vary (increase) based on the number of eligible students for whom you pay qualified expenses. 

What expenses qualify for the education credits? 

Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other postsecondary educational institution eligible to participate in the student aid programs administered by the Department of Education.

Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution. 

I am currently going to school and I received a Form 1098-T. What is this form? How can I claim an education tax credit? 

An eligible educational institution (such as a college or university) that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st. You may be able to claim a credit for these expenses by completing Form 8863 (PDF), Education Credits, and attaching it to your Form 1040. 

Who can claim the American Opportunity Tax Credit? 

You can claim a American Opportunity Tax Credit for an eligible student who is:

  • Enrolled in one of the first 4 years of postsecondary education. 
  • Enrolled in a program that leads to a degree, certificate, or other recognized educational credential. 
  • Taking at least one-half of the normal full-time workload for the course of study for at least one academic period beginning during the calendar year. 
  • Free of any felony conviction for possessing or distributing a controlled substance (drugs).

An eligible student can be you, your spouse, or an eligible dependent

What are the 2009 credit amounts for the American Opportunity Tax Credit and the Lifetime Learning Credit? 

For the American Opportunity Tax Credit, the maximum credit per student is $2,500 (100 percent of the first $2,000 of qualified tuition and related expenses, plus 25 percent of the next $2,000 of such expenses). For the Lifetime Leaning Credit, the maximum credit per student is $2,000 (20% of the first $10,000 of qualified tuition and related expenses). There are phase outs based on income levels.