Types of Education Tax Credits:
Eligibility and Income Limits:
Both credits have income limits, which phase out at certain levels.
For AOTC, the phase-out range is $80,000-$90,000 for single filers and $160,000-$180,000 for joint filers.
For LLC, the phase-out range is $59,000-$69,000 for single filers and $118,000-$138,000 for joint filers.
American Opportunity Tax Credit (AOTC):
Up to $2,500 credit per eligible student for qualified education expenses.
40% of the credit (up to $1,000) is refundable.
Eligibility: Students pursuing a degree, enrolled at least half-time, and haven't finished four years of post-secondary education.
Qualified expenses: Tuition, fees, and course materials.
Lifetime Learning Credit (LLC):
Up to $2,000 credit per tax return for qualified education expenses.
No limit on the number of years you can claim the credit.
Eligibility: Students taking courses to improve job skills or pursuing higher education.
Qualified expenses: Tuition and fees.
Other Related Tax Benefits:
Student Loan Interest Deduction: Up to $2,500 deduction for interest paid on qualified student loans.
529 Plans: Tax-advantaged savings plans for higher education expenses.
Coverdell Education Savings Accounts (ESAs): Tax-advantaged savings accounts for education expenses.
Key Considerations:
You can claim only one credit per student per year.
Credits are subject to phase-out based on income and other factors.
Qualified education expenses must be paid during the tax year.
Forms and Claiming the Credit:
Claim the AOTC or LLC on Form 8863, Education Credits.
You'll need Form 1098-T from your educational institution to claim the credit