Education Tax Credits in the USA
In addition to scholarships and grants for education in the US, you may also be eligible for tax credits if your grant does not cover the full cost of tuition. There are two types of education tax credits: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
American Opportunity Tax Credit (AOTC)
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Credit Amount: Up to $2,500 as a tax credit, which reduces your tax liability.
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Refundable Portion: Up to 40% is refundable, meaning a maximum of $1,000 can be received as a refund even if you owe no tax.
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Income Limit (Phase-out): $90,000 for single filers ($180,000 for married couples).
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Mandatory Condition for Married Couples: Must file a joint tax return.
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Educational Requirement: Must be pursuing higher education (a degree or other recognized educational credential).
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Duration Limit: Can only be claimed for four years per eligible student.
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Other Condition: The student must not have been convicted of a felony drug offense.
Lifetime Learning Credit (LLC)
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Credit Amount: Up to $2,000 as a credit, which reduces your tax liability.
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Refundable Portion: The unused portion cannot be received as a refund.
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Income Limit (Phase-out): $90,000 for single filers ($180,000 for married couples).
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Mandatory Condition for Married Couples: Must file a joint tax return.
- Educational Requirement: Can be used not only for higher education but also for job skills training or continuing education courses.
- Duration Limit: There is no limit on the number of years you can claim this credit.
Important Note: Both credits cannot be claimed in the same tax year for the same student.
