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Education Tax Credits

The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are two education tax credits available to students and families to offset the costs of higher education. These credits are designed to reduce the amount of tax owed on your return, potentially leading to a refund to help cover educational expenses.

For questions about what is reported on the form, please refer to the Tax Information FAQ on the Student Accounts website.

Key Tax Credit Information

In January 2024, students will receive Form 1098-T for the 2023 tax year, aiding in determining eligibility for education tax credits. Tuition expenses covered by tax-free funds, such as such as scholarships, grants, etc., don't qualify. However, credit can be claimed for tuition expenses paid with loans of any type. 

In the case where both sources of funds are used to pay both tuition and housing expenses, all tax-free aid is presumed by the IRS to be applied to tuition expenses first. The exception to this rule would be a scholarship or grant specifically designated by the grantor to be used for housing, books or other non-tuition expenses.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is available for students who at the start of the year have not completed their fourth year of post secondary education. The credit provides up to $2,500 per student (100% of the first $2,000 of qualified tuition and related expenses and 25% of the next $2,000). The American Opportunity Tax Credit is calculated on eligible expenses paid during the 2023 calendar year. To be eligible for the American Opportunity Tax Credit, students must be enrolled at least half time for at least one academic period. There are other provisions and requirements that should be reviewed before claiming the American Opportunity Tax Credit.

Lifetime Learning Tax Credits

The Lifetime Learning Credit (LLC) is a less restrictive tax credit of up to $2,000–20% of the first $10,000 of qualified tuition and related expenses–per family whereas the American Opportunity Tax Credit is per student. The Lifetime Learning Credit is also calculated on eligible expenses paid during the 2023 calendar year. While the Lifetime Learning Credit is more broadly applicable to post-secondary education, it is still important to look into the specifics of the credit before claiming it.

Tax Guidelines

  • Graduate students should note that Box 9 on Form 1098-T will be checked to indicate their status.
  • While Form 1098-T is not required to be filed with your tax return, retaining it with your tax records is important.
  • Claiming either AOTC or LLC credit requires completing and attaching IRS Form 8863 to your tax return. No further documentation is needed.
  • Income thresholds apply, affecting eligibility for both the American Opportunity and Lifetime Learning Credits.
    • Married taxpayers with a combined modified adjusted gross income of more than $180,000 or single taxpayers with an adjusted gross income of more than $90,000 do not qualify for the American opportunity credit in 2023.
    • Married taxpayers with a combined modified adjusted gross income of more than $180,000, or single with an adjusted gross income of more than $90,000 do not qualify for the lifetime learning credit in 2023.
    • Married taxpayers must file jointly to qualify for either credit.
  • As the University cannot offer tax or legal advice, seeking professional guidance or contacting the IRS directly is advisable if you believe you qualify.

Taxability of Scholarships and Grants

Scholarship or grant amounts received may or may not be taxable. Consult a tax advisor and/or IRS Publication 970, Tax Benefits for Education before preparing tax returns.

Additional Resources

For more details and assistance with education tax credits, explore the following resources:

  • IRS Publication 970 explains education tax benefits for use in preparing 2023 returns.
  • IRS Form 8863 and Form 8863 Instructions provides necessary forms and guidance for claiming the American Opportunity Tax Credit and Lifetime Learning Credits.
  • Student Accounts FAQ answers to common questions regarding tax credits and Form 1098-T.
  • Education Tax Credits offers official IRS guidance on education tax benefits.
  • NACUBO's Education Tax Credit provides resources, forms, and filing instructions on both AOTC and LLC credits from the National Association of College and University Business Officers (NACUBO), as well as information about some of the other provisions of the Taxpayer Relief Act.

Need More Information?

For questions or comments, please email the Office of Student Accounts.