College students should study up on these two tax credits
Tax Tip 2022-123, August 11, 2022
Pursuing higher education, whether it's specialized job training or graduate school, can be expensive. However, eligible taxpayers who paid higher education costs for themselves, their spouse, or dependents in 2021 may be able to take advantage of two education tax credits offered by the Internal Revenue Service (IRS). These credits, the American Opportunity Tax Credit and the Lifetime Learning Credit, can help offset education costs by reducing the amount of tax owed. In some cases, taxpayers may even receive a refund of up to $1,000 if the American Opportunity Tax Credit reduces their tax liability to zero.
To be eligible to claim either of these credits, a taxpayer or their dependent must have received a Form 1098-T, Tuition Statement, from an eligible educational institution. However, there are exceptions for certain students. To claim either credit, taxpayers must complete Form 8863, Education Credits, and file it with their tax return.
Here are some key things taxpayers should know about each of these credits:
American Opportunity Tax Credit
The American Opportunity Tax Credit is:
- Worth a maximum benefit of up to $2,500 per eligible student.
- Only available for the first four years at a post-secondary or vocational school.
- For students pursuing a degree or other recognized education credential.
- Partially refundable; taxpayers could get up to $1,000 back.
Lifetime Learning Credit
The Lifetime Learning Credit is:
- Worth a maximum benefit of up to $2,000 per tax return, per year, regardless of the number of qualifying students.
- Available for all years of postsecondary education and for courses to acquire or improve job skills.
- Available for an unlimited number of tax years.
Taxpayers can use the Interactive Tax Assistant tool on IRS.gov to determine if they are eligible for either of these credits.
For more information, taxpayers can:
- Compare Education Credits
- Refer to Publication 970, Tax Benefits for Education
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