The Internal Revenue Code provides two education credits to offset the costs of higher education. The first is the American Opportunity Tax Credit and the second is the Lifetime Learning Credit. With tax season just around the corner, it might be a good idea to determine whether you will qualify for any of these credits so that you can have the information needed to claim the credit ready at filing time.

Eligibility Requirements for Both Education Credits

In order to claim either credit you must meet the following requirements:

1. You, your spouse or your dependent must have taken post high school courses during 2024. Private school tuition for elementary, middle or high school are not eligible for these education tax credits.

2. The person who took the courses must have a Form 1098-T, Tuition Statement. These statements are issued by the institution where classes were taken by January 31 of the year following the taxable year. This requirement does not apply if the educational institution is not required to issue the students a Form 1098-T. The exception is limited to: students who are qualified nonresident aliens, students whose education expenses are fully covered by scholarships, students who educational expenses are paid through a formal billing arrangement and students who are enrolled in courses where no credit is awarded.

3. To qualify for the full credit, the modified adjusted gross income of the filer claiming the credit cannot exceed $80,000 or $160,000 if filing married jointly. The credit is reduced if the income is above $80,000 but below $90,000 or $180,000 if married filing jointly. The credit is not available if the income is above $90,000 or $180,000 if married filing jointly.

4. The filing status of the person claiming the credit cannot be married filing separately.

5. The person claiming the credit cannot have been claimed as a dependent on another person’s return.

6. The person claiming the credit or the person’s spouse cannot be a nonresident alien for any part of 2024 unless the nonresident alien(s) elected to be treated as resident alien(s) for tax purposes.

If the above requirements are satisfied, the student must then meet the eligibility requirements of the specific credit being claimed.

Eligibility Requirements for American Opportunity Tax Credit

The maximum tax credit available under the American Opportunity credit provisions is $2,500 per eligible student. Forty percent of the credit is refundable under certain circumstances. In order to be considered an eligible student, the following requirements must be satisfied:

1. The student must be pursuing a program which leads to a degree or other recognized education credential.

2. The student must have been enrolled at least half-time for at least one academic period that began during 2024 or that begin in the first 3 months of 2025 if the qualified expenses were paid in 2024.

3. As of the end of 2024, the student had not been convicted of a felony for possessing or distributing a controlled substance.

4. The student has not completed the first four years of postsecondary education before 2024. The credit is only available for four tax years.

5. Filers and students must have been issued a TIN/SSN by the due date of their 2024 return (including extensions).

6. The educational institution must have an employer identification number and this number must be provided to the IRS on the tax return schedule claiming the tax credit.

7. The credit will be applied to payments for tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance.

8. Double benefits are not allowed. Thus, the expenses for which the credit is being claimed cannot have been used to claim another deduction or credit. Additionally, the expenses cannot have been paid entirely with a tax-free scholarship, grant, or employer-provided educational assistance nor can the person claiming the credit or someone else have received a refund of all the educational expenses.

The IRS warns taxpayers to make sure that they are eligible to claim the American Opportunity credit and retain the documentation needed to establish eligibility to claim the credit. Taxpayers who are caught claiming the credit when ineligible will be required to pay back the credit, plus interest. The taxpayer may also be held liable for a negligence or fraud penalty and can be banned from claiming the credit from two to ten years.

Eligibility Requirements for Lifetime Learning Credit

The maximum tax credit available under the Lifetime Learning credit provisions is $2,000 per return. The credit is not refundable. In order to be considered an eligible student, the following requirements must be satisfied:

1. The credit will be applied to payments for tuition, required enrollment fees, and course materials that the student needs for a course of study. The fees and materials must have been paid to the educational institution.

2. The payment must be for expenses incurred for academic periods that began during 2024 or beginning in the first 3 months of 2025 if the qualified expenses were paid in 2024.

3. The credit is available for all years of postsecondary education and for courses to acquire or improve job skills. The student need not be pursuing a degree nor a recognized education credential.

4. The student need not be enrolled in a particular program nor be taking a minimum number of courses during the year to qualify for the credit.

5. The credit is available for an unlimited number of tax years, not just four years.

6. Felony drug convictions do not make the student ineligible for the credit.

Double benefits are not allowed. Thus, the expenses for which the credit is being claimed cannot have been used to claim another deduction or credit. Additionally, the expenses cannot have been paid entirely with a tax-free scholarship, grant, or employer-provided educational assistance nor can the person claiming the credit or someone else have received a refund of all the educational expenses.