Are you or one of your dependents currently pursuing higher education? You may be eligible for special tax credits. These credits help reduce your bill and could even provide you with a refund.

This post will discuss the two major education tax credits, including eligibility criteria and the claiming process.

Understanding Education Tax Credits

The IRS offers two primary tax credits that can significantly reduce your tax bill: the American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC). These education tax credits are a dollar-for-dollar reduction in the income tax you owe, not just a deduction from your taxable income.

American Opportunity Credit

The AOC is a $2,500 tax credit that covers tuition, textbooks, and supplies. Eligible students can claim the credit yearly during their first four years of college or university. It technically covers 100% of the first $2,000 you spend and drops to %25 if you spend another $2,000.

If the credit is larger than your tax bill, you’ll get a refund of up to $1,000.

Eligibility Criteria

To receive the full credit, you need a modified adjusted gross income (MAGI) of $80,000 or less if single, $160,000 if filing jointly.

You also:

  • Must be completing your first four years of education.
  • Need to attend at least part-time.
  • Have to pursue a qualified degree.
  • Need to be enrolled in an accredited institution.

Lifetime Learning Credit

The Lifetime Learning Credit is a non-refundable tax credit of up to $2,000 available for post-secondary education. Unlike the AOC, you don’t need to pursue a program leading to a degree or other recognized education credential to qualify.

You can claim the Lifetime Learning Credit at any point in your higher education career, but it makes the most sense when you’re in graduate school or beyond. The American Opportunity Tax Credit is more generous and a better option for undergraduates.


  • You also need a modified adjusted gross income (MAGI) of $80,000 or less if single $160,000 if filing jointly to receive the full Lifetime Learning Credit.
  • You need to be enrolled in an eligible educational institution.

Claiming Education Tax Credits

Here’s how you can claim your well-deserved education tax credit:

  1. Gather Necessary Documentation: To claim AOC or LLC, you must have received Form 1098-T from your school. Additionally, you should keep records of your qualified expenses, such as tuition, fees, and textbooks.
  2. Complete Form 8863: You’ll need to complete and submit Form 8863.
  3. Reporting Credits on Tax Return: You report your education tax credits directly on your tax return. Be vigilant for errors, as incorrect reporting could delay your refund or add fees to your bill.

Additional Tax Breaks for Education Expenses

Besides the AOC and LLC, other tax breaks can help reduce your education costs:

  • Student Loan Interest Deduction: If you paid interest on a student loan during the tax year, you might be eligible to deduct up to $2,500 of that interest from your taxable income.
  • Coverdell Education Savings Account: A Coverdell ESA allows you to save up to $2,000 annually for a child’s education expenses. While contributions are not tax-deductible, the earnings on those funds grow tax-free.
  • Self-Employed Deduction: Are you going back to school for work? Your schooling might be a deductible business expense. You can generally deduct 100% of your education expenses if they maintain or improve skills required for your current business.


Education tax credits are a smart way for taxpayers to reduce their tax liability while investing in personal and professional growth. By understanding how these credits work, you can plan to receive the highest return.

Remember, taking full advantage of these credits requires attention to detail and reliable record-keeping. Make it easier for yourself and work with a professional. The team at Kondler & Associates, CPAs, will help you navigate education tax credits so you end up with the lowest bill. Contact us today!