College expenses can put a serious dent in your wallet, but luckily, there are some awesome tax credits to help offset the costs. There are a couple of education credits that can help reduce your tax burden directly. Understanding what to claim for education expenses and the differences between these credits is key to maximizing your education-related tax savings.

Form 1098-T is your go-to document for claiming education credits like the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit (LLC). It shows the amount you paid for tuition and qualified expenses to your school in box 1, which helps you calculate how much credit you can claim. Just make sure the info on the form is accurate. If it’s missing or incorrect, reach out to your school to fix it. In some situations, like if you paid with scholarships or took non-credit courses, you may not get a 1098-T, but you can still claim the credit if you meet the requirements and can prove your expenses.

Qualified education expenses are the costs that help you get through college while also giving you a chance to claim some awesome tax credits - they’re generally reported in Box 1 of your 1098-T form you get from your school. These expenses cover tuition, required fees, and other related costs for eligible students attending approved schools. Whether the payments are made by you, your spouse (if you file jointly), a dependent student, or even a generous friend or relative, you can claim an education credit for the expenses. You can pay with cash, card, or even loans—just be sure to claim the credit for the year the expenses are paid, not when you take out or repay the loan.

Tuition, mandatory fees, and student activity fees required for enrollment are in. If you’re claiming the American Opportunity Tax Credit (AOTC), the cost of books and supplies counts, even if you buy them from off-campus stores. But not everything qualifies, room and board, transportation, insurance, and personal expenses don’t make the list.

If you’re going for the Lifetime Learning Credit (LLC), you can also claim expenses for courses that improve your job skills. Just make sure the academic period starts during the tax year or within the first three months of the next one. Plus, don’t forget you can’t claim expenses paid with tax-free funds like scholarships. If the student withdraws from school, you can only include non-refundable amounts paid. By staying on top of these expenses, you can get the most out of your education tax benefits.

Education credits directly cut down the amount of tax you owe, giving you a dollar-for-dollar reduction on your tax bill. So, if you qualify for a credit of $2,000, that’s like getting a $2,000 discount on your taxes! There are two education credits but you can only take one per student: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), which we’ll go into more detail on below.

The American Opportunity Tax Credit (AOTC) is a fantastic way to make college more affordable. This tax break allows you to save money on tuition, fees, and even books during your first four years of higher education. One of the coolest features is that if you don’t owe any taxes, you can still get some money back as a refund with this credit (that means it’s a refundable credit). If you have qualified education expenses and are within the income limits, the AOTC helps lighten the financial load, letting you focus on your studies and enjoy the college experience without as much stress about costs.

Remember that you cannot claim both the American Opportunity Credit and the Lifetime Learning Credit for the same student in the same tax year.

To qualify for the American Opportunity Tax Credit (AOTC), students must be enrolled at least half-time in an eligible educational institution and pursuing a degree or recognized credential. The credit applies to the first four years of post-secondary education and covers qualified expenses like tuition, fees, and course materials. Students cannot have claimed the AOTC for more than four tax years and must not have any felony drug convictions. To claim the full credit your modified adjusted gross income (MAGI) must be $80,000 or less for individuals and $160,000 or less if filing jointly, with the credit gradually phasing out for those with higher incomes.

The Lifetime Learning Credit (LLC) helps cover qualified tuition and related expenses for students taking undergraduate, graduate, or professional courses, as well as those seeking to improve job skills, and offers up to $2,000 per tax return (or up to the amount of tax you owe, whichever is smaller) with no limit on the number of years you can claim it. Unlike the American Opportunity Tax Credit (AOTC), which is specifically for students in their first four years of higher education and can provide a larger credit per student, the LLC is more flexible and can be claimed for any number of years, making it ideal for lifelong learners and those pursuing advanced degrees.

To qualify, either you, a dependent, or a generous third party needs to pay for those qualified education expenses. These expenses must be for an eligible student who’s enrolled at an approved educational institution. That eligible student can be you, your spouse, or a dependent listed on your tax return. If you’re curious about the fine print of who can’t claim the credit, we’ll cover that below.

To be considered an eligible student for the LLC, the student must be enrolled in courses at an accredited institution, whether they’re pursuing a degree or taking classes to enhance their job skills. They also need to be enrolled in at least one academic period that begins during the tax year—think semesters, trimesters, or even summer sessions. Plus, keep in mind the income limits: for 2024, the credit starts to phase out if your modified adjusted gross income (MAGI) is between $80,000 and $90,000 ($160,000 to $180,000 for joint filers). Stay on top of those numbers, and let the LLC brighten your educational journey.

Not everyone gets to claim education credits, and that’s just part of the deal. If you’ve already taken advantage of the American Opportunity Tax Credit (AOTC) for the same student during the same tax year, the Lifetime Learning Credit (LLC) is off-limits. Nonresident aliens aren’t able to take these credits, and if your educational expenses are completely covered by scholarships or fellowships, you won’t be able to claim them either. Plus, if you’re diving into non-credit courses—like that fun pottery class or a unique cooking workshop—those expenses won’t count toward the credits. So while education credits can be a fantastic boost, there are some rules to keep everything in check.

The IRS has an interactive app that can help you determine if you are eligible.

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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