Education Tax Credits
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
American Opportunity & Lifetime Learning Tax Credits
The American opportunity credit 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 credit is calculated on eligible expenses paid during the 2023 calendar year. To be eligible for the American opportunity 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 credit.
The lifetime learning credit 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 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.
Further down on this Web page are some links to additional information on the American opportunity and lifetime learning credits.
In January 2024 students will receive Form 1098-T from the University of Notre Dame for the 2023 tax year. The 1098-T contains data elements the IRS will find helpful in calculating students' eligibility for the American opportunity and lifetime learning credits. For questions about what is reported on the form, please refer to the Tax Information section of the FAQ pages on the Student Accounts Website.
Credit can not be claimed for tuition expenses paid with tax-free funds (scholarships, grants, etc.). Credit can be claimed, however, 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.
- Box 9 on Form 1098-T should be checked for graduate students.
- Form 1098-T is not required to be filed with your tax return. Keep the form with your tax documentation.
- To claim the credit, complete and attach IRS 2023 Form 8863 to your tax return. No other documentation or supporting paperwork is required.
- 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.
- The University may not provide tax or legal advice and, therefore, cannot determine qualifications for either credit. If you believe you qualify for the American opportunity or lifetime learning credits, consult a tax advisor or contact the IRS at 1-800-829-1040.
- Questions or comments may be submitted to Student Accounts
Further information can be obtained at the following links:
- IRS Publication 970, Tax Benefits for Education, for use in preparing 2023 returns.
- IRS Form 8863
- Form 8863 Instructions
- Student Accounts FAQ
- Education Tax Credits - IRS Website
- NACUBO's Education Tax Credit site provides information on both tax credits, as well as information about some of the other provisions of the Taxpayer Relief Act. It also has some links to various IRS publications. NACUBO is the National Association of College and University Business Officers.