Tax Credits for College Expenses
With the American Opportunity Credit and the Lifetime Learning credit, Uncle Sam helps you defray some of the costs of getting a higher education.
These tax benefits put the money you spend on qualified educational expenses back in your pocket. (A tax credit is a dollar-for-dollar reduction of your tax liability.) You have to choose which benefit to claim because you cannot use the same expenses to claim more than one benefit.
American Opportunity Credit
This credit is available for expenses incurred by students who are in their first four years of undergraduate study and attended college at least half-time for an academic period that began in the tax year for which you're filing. If you've already claimed this credit or the former Hope credit, for more than four tax years, you are no longer eligible.
A parent, spouse or student who is not claimed as a dependent can take a federal income-tax credit equal to 100% of the first $2,000 spent on qualified education expenses—tuition, fees and textbooks—and 25% of the next $2,000, for a total credit of $2,500 for each qualifying student. If the credit more than wipes out your tax liability for the year, you’ll get a refund check from the IRS for 40% of the remaining amount, up to $1,000, for each qualifying student.
Married couples filing jointly qualify for the full credit with a modified adjusted gross income of $160,000 or less, and single filers qualify with an income of $80,000 or less. The credit phases out completely at $180,000 for married couples and $90,000 for single filers.
Lifetime Learning Credit
With this credit, you can claim 20% of your out-of-pocket costs for tuition, fees and books, up to $10,000, for a total of $2,000. Unlike the American Opportunity credit, the Lifetime Learning credit is not limited to undergraduate educational expenses, nor does the credit apply only to students attending at least half-time. You can claim the credit for yourself, your spouse or your dependent up to $2,000 per family each year.
For 2019 tax returns, you qualify for the benefit if your modified adjusted gross income is no higher than $136,000 for married couples filing jointly or $68,000 for single filers ($138,000 and $69,000, respectively, for 2020). Couples get the full 2019 credit at $116,000; singles at $58,000 ($118,000 and $59,000 for 2020).
For more about both of these tax credits and other education benefits, see IRS Publication 970.