5 Tips: Get Schooled on Education Tax Credits

If you, your spouse or a dependent are heading off to college in the fall, some of your education costs could save you money at tax time. Here are five IRS tips to keep in mind.

  • Education Tax Credits.The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are both available for eligible students. The AOTC is worth up to $2,500 per year, but can only be claimed for the first four years of higher education. Forty percent of the AOTC is refundable (if eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes). The LLC is worth up to $2,000 on your tax return, and there is no limit on the number of years you can claim for an eligible student.
  • One credit per student.You can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student (e.g., AOTC for one; LLC for the other).
  • Qualified expenses.You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees and other related expenses.
  • Form 1098-T. In most cases, you should receive Form 1098-T, Tuition Statement, from your school by February 1 of each year. This form reports qualified expenses to the IRS and to you. The amount shown on the form may be different than the amount you actually paid (for instance, the cost you paid for textbooks may not appear on the form). However, you still may be able to include those costs when you figure your credit for that year. Make sure to keep your eligible receipts through the year, and keep them handy at tax filing time.
  • Income limits.These credits are subject to income limitations and may be reduced or eliminated, based on your income. Visit the IRS Interactive Tax Assistant to see if you are eligible to claim education credits. Visit the IRS Education Credits page for more.  Also see Publication 970, Tax Benefits for Education. You can get it on gov/forms any time.