Federal Tax Credits
American Opportunity Credit
The American Opportunity Credit is available for tax year 2023, which allows a maximum tax credit of $2,500 (100% of the first $2,000 and 25% of the next $2,000). The credit is available for the first four years of post-secondary education, and 40% of the credit (up to $1,000) is refundable to many taxpayers.
Eligibility is determined by income if filing as single, head of household or qualifying widow. The maximum limit using Marginal Adjusted Gross Income (MAGI) is $90,000. The limit of the tax credit before the phase out starts is $80,000. The MAGI limit for married taxpayers filing jointly is $180,000. The phase out of the tax credit for married filing jointly taxpayers begins at $160,000.
For more information, view the following: Form 1098-T (form instructions)
Lifetime Learning Credit
Lifetime Learning Credit allows you to take a tax credit if you do not qualify for the American Opportunity Credit. Adults returning to college and students attending less than half time are eligible for the tax credit. The tax credit allows for a maximum of 20% – $2,000 ($10,000 x 20%) – of qualified expenses.
Eligibility is determined at the same income levels as the Hope Scholarship. Single filers over $90,000 in income and joint filers over $180,000 are ineligible. The Lifetime Learning Credit is gradually phased out if your Modified Adjusted Gross Income (MAGI) is between $80,000 to $90,000 for individuals and $160,000 to $180,000 for married filing jointly. Taxpayers filing married separately are not eligible for the Lifetime Learning tax credit.
The Lifetime Learning Credit may not be claimed during the same year as the Hope Scholarship Credit.
Comparison Chart
If you have more than one student eligible for the American Opportunity Credit, you must claim the same credit for all eligible students. You cannot claim both the American Opportunity Credit and the Lifetime Learning Credit on the same tax return for one student. However, you can claim both the American Opportunity Credit and the Lifetime Learning Credit on the same return but not for the same student.
| Comparison | American Opportunity Credit | Lifetime Learning Credit |
|---|---|---|
| Maximum credit | Maximum credit up to $2,500 credit per eligible student. | Up to $2,000 credit per return. |
| Limit on Modified Adjusted Gross Income (MAGI) | $180,000 if married filing jointly adjusted gross; $90,000 if single, head of household or qualifying widow(er). | $180,000 if married filing jointly; $90,000 if single, head of household or qualifying widow(er). |
| Refundable or nonrefundable | 40% of credit may be refundable; the rest is nonrefundable. | Nonrefundable – credit limited to the amount of tax you must pay on your taxable income |
| Number of years of post-secondary education | Available only for the first 4 years of post-secondary education. | Available for all years of post-secondary and for courses to acquire or improve job skills. |
| Number of tax years credit available | Available only for 4 tax years per (including any year(s) Hope Scholarship Credit was claimed.) | Available for an unlimited number of years |
| Type of degree required | Student must be pursuing an undergraduate degree or other recognized education credential. | Student does not need to be pursuing a degree or other recognized education credentials. |
| Number of courses | Student must be enrolled at least half time for at least one academic period beginning during the year. | Available for one or more courses. |
| Felony drug conviction | No felony drug convictions on student’s records. | Felony drug convictions are permitted. |
| Qualified expenses | Tuition and required enrollment fees. Course-related books, supplies and equipment do not need to be purchased from the institution to qualify. | Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) |
| Payments for academic periods | Payments made in 2023 for academic periods beginning in 2023 or beginning in the first 3 months of 2024. | Payments made in 2023 for academic periods beginning in 2023 or beginning in the first 3 months of 2024. |