Two Main Education Tax Credits
The IRS offers two credits for higher education expenses:
- American Opportunity Tax Credit (AOTC) — for first 4 years of college
- Lifetime Learning Credit (LLC) — broader eligibility, lower maximum
American Opportunity Tax Credit (AOTC)
Maximum credit: $2,500 per student per year (100% of first $2,000 + 25% of next $2,000) Refundable: 40% (up to $1,000) is refundable
Eligibility:
- Student must be in their first 4 years of post-secondary education
- Enrolled at least half-time for at least one academic period
- Not convicted of a felony drug offense
- Student must have a valid SSN
Income phase-out (2024):
- Single: $80,000–$90,000 MAGI
- Married: $160,000–$180,000 MAGI
Qualified expenses: Tuition, fees, and course materials (including books and supplies required for enrollment)
Lifetime Learning Credit (LLC)
Maximum credit: $2,000 per return (20% of up to $10,000 in expenses) Refundable: No — non-refundable only
Eligibility:
- Any post-secondary education (graduate school, professional courses, single class)
- No limit on years claimed
- Does not require half-time enrollment
Income phase-out (2024):
- Single: $80,000–$90,000 MAGI
- Married: $160,000–$180,000 MAGI
AOTC vs. LLC: Which Is Better?
| Feature | AOTC | LLC |
|---|---|---|
| Max credit | $2,500 | $2,000 |
| Refundable | Yes (40%) | No |
| Years eligible | 4 | Unlimited |
| Enrollment requirement | Half-time | Any |
For undergraduate students in years 1–4: AOTC is almost always better.
You Cannot Claim Both
You can only claim one education credit per student per year. For a family with multiple students, each student can qualify separately (AOTC for the undergrad, LLC for the graduate student).