Whether online, in-person, part-time, or full-time, higher education can be expensive. There are two tax credits available to help taxpayers save on the costs associated with higher education: the American Opportunity Tax Credit and the Lifetime Learning Credit. Taxpayers who pay for higher education in 2020 may qualify to claim one or both of these tax-saving credits on next year's tax return.
To be eligible, either the taxpayer, spouse, or dependent needs to:
Be enrolled in an eligible educational institution (i.e., a school offering higher education beyond high school); and
Have paid qualified education expenses for higher education and received IRS Form 1098-T (Tuition Statement) from the eligible educational institution.
However, there are exceptions if a student has not received IRS Form 1098-T (see the answers to questions 18,19 and 20 on the IRS's Education Credits: Questions and Answers).
Note, you cannot claim either of these tax credits if someone else (e.g., your parents) claims you as a dependent on their tax return. You also cannot claim either credit if your filing status is married filing separately.
The American Opportunity Tax Credit (AOTC)
Worth a maximum benefit of up to $2,500 per eligible student;
Only for the first four years at an eligible college or vocational school;
For students pursuing a degree or other recognized education credential; and
Partially refundable (up to $1,000 of the credit is refundable).
Note, you cannot claim the AOTC if, as a single filer, your modified adjusted gross income (AGI) is greater than $90,000 ($180,000 if married filing jointly).
The Lifetime Learning Credit (LLC)
Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify;
Available for all years of post-secondary education and for courses to acquire or improve job skills;
Available for an unlimited number of tax years;
This is a non-refundable credit (which means it can only help reduce your tax liability).
Note, you cannot claim the LLC if, as a single filer, your modified adjusted gross income (AGI) is greater than $68,000 ($136,000 if married filing jointly).
Quick Eligibility Check
Taxpayers can use the IRS's Interactive Tax Assistant tool to figure out if they are eligible for either of these two tax credits.
For more information, see the following IRS resources: