If you paid for college or other qualified education expenses, you may be able to reduce your federal tax bill using education tax credits. These credits directly lower the amount of tax you owe and can provide meaningful savings if you qualify.
The two main education credits are:
American Opportunity Tax Credit (AOTC)
Lifetime Learning Credit (LLC)
You can’t claim both credits for the same student in the same tax year, so understanding the differences matters.
Form 1098-T: Tuition Statement
Form 1098-T is the primary document used to claim education tax credits. Schools generally send it by January 31.
The form shows:
Tuition and qualified expenses paid (Box 1)
Scholarships or grants received (Box 5)
If your form is missing or incorrect, contact your school for a correction. In some cases, you may not receive a 1098-T, but you can still claim a credit if you’re eligible and can document qualified expenses.
What are qualified education expenses?
Qualified education expenses are costs paid to an eligible educational institution for an eligible student.
Generally, these include:
Tuition
Required enrollment fees
Student activity fees required for enrollment
Additional rules by credit
AOTC also allows:
Course-related books and supplies, even if purchased off-campus
LLC allows:
Tuition and fees for undergraduate, graduate, or professional courses
Courses taken to improve job skills
Expenses that don’t qualify
Room and board
Transportation
Insurance
Medical or personal expenses
Expenses paid with tax-free funds (scholarships, grants, employer assistance)
Expenses must be claimed in the year they’re paid, even if paid with loans.
How education tax credits work
Education credits reduce your tax bill dollar for dollar. For example, a $2,000 credit reduces your tax owed by $2,000.
You can claim only one education credit per student per year.
American Opportunity Tax Credit (AOTC)
The AOTC is designed for students in their first four years of post-secondary education.
2025 AOTC basics
Maximum credit: Up to $2,500 per student
Refundable portion: Up to $1,000
Eligible expenses: Tuition, required fees, books, and supplies
Years available: First four tax years of higher education
AOTC eligibility
The student must:
Be enrolled at least half-time
Be pursuing a degree or recognized credential
Not have claimed the AOTC for more than four tax years
Not have a felony drug conviction
Income limits (2025):
Full credit if MAGI is $85,000 or less (single)
$170,000 or less (married filing jointly)
Credit phases out above these amounts
Lifetime Learning Credit (LLC)
The LLC is more flexible and can be claimed for any level of education.
2025 LLC basics
Maximum credit: Up to $2,000 per return
Refundable?: No
Years available: Unlimited
Eligible courses: Undergraduate, graduate, professional, or job-skill courses
LLC eligibility
Expenses must be paid for an eligible student enrolled in at least one academic period during the tax year
The student can be you, your spouse, or your dependent
The institution must be eligible
Income limits (2025):
Credit phases out if MAGI is between:
$80,000–$90,000 (single)
$160,000–$180,000 (married filing jointly)
Who can’t claim education credits?
You generally can’t claim an education credit if:
You’re a nonresident alien (with limited exceptions)
Your expenses were fully paid with tax-free scholarships or grants
You’re claiming both AOTC and LLC for the same student
The courses are non-credit (for example, hobby or recreational classes)
How to check your eligibility
The IRS offers an Interactive Tax Assistant that can help you determine which education credit you may qualify for based on:
Your income
The student’s enrollment status
The expenses you paid
Key takeaway
Education tax credits can significantly reduce your tax bill if you paid qualified education expenses. The AOTC offers a larger, partially refundable credit for students in their first four years, while the LLC provides flexibility for lifelong learning.
Understanding which credit applies—and what expenses qualify—can help you maximize your tax savings.
This content is provided for informational purposes only and should not be construed as tax, legal, financial, accounting, or other advice. Rules and regulations vary by location and are subject to change, so please consult with an expert if you need advice specific to you.
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