Education Tax Credits-What You Need to Know!

January 28th, 2020 at 8:37 PM

The American Opportunity Tax Credit (AOTC) and the more familiar Lifetime Learning Credit (LLC) can make higher education costs more affordable. 

The AOTC equals 100% of the 1st $2000 of a student’s qualified education expenses plus 25% of the next $2000; maximum annual credit is $2500. You can claim the AOTC for yourself, spouse, and dependent children. If you have several students in your family, you can claim multiple credits based on the expenses of each student; 3 children in college–up to $7500! Credit is NOT allowed for a student who has completed the 1st 4 years of post-secondary education as of the beginning of the year. So, if your child completed LESS than 4 years of college as of January 1, 2019, you can claim the credit on the 2019 tax filing. Other requirement–student carries at least half-time course load for a minimum of 1 semester beginning in that year.

Expenses for the AOTC included tuition and mandatory enrollment fees, cost of books and course materials as well. Room & Board not included, nor expenses for athletic or other activities. To qualify for credit, students must attend an eligible institution–go to to verify if institution has a Federal School Code.

LLC credit covers up to $2000 of undergraduate and gradual school costs—credit is 20% of up to $10,000 of qualified education expenses; includes dependents as well.

LLC can help cover undergraduate costs for a student who is NOT eligible for the AOTC because they are carrying a limited course load or already have 4 years of college credit;and, cost of graduate school to maintain or improve skills. Qualified expenses include tuition and mandatory enrollment fees; books and course materials may qualify, but only if you are required to purchase them directly from school.

The actual calculation of these 2 credits can be challenging–but, well worth the time and effort to receive substantial tax reduction for education costs. 

Mark S. Fineberg, CPA


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