The American Opportunity and Lifetime Learning credits
are available to individuals for out-of-pocket tuition expenses
incurred by students pursuing college degrees, graduate
degrees or vocational training.
The American Opportunity Credit is new for 2009 and 2010,
and revamps and expands the Hope Credit. The American Opportunity
Credit now covers four years of post-secondary education,
adds required course materials to qualifying expenses, makes
the credit available at higher income levels, and increases
the amount of the credit.
The Lifetime Learning Credit is available to students attending
a post-secondary educational program and who are not eligible
to take the American Opportunity Credit. Either the American
Opportunity Credit or the Lifetime Learning Credit can be
claimed for each eligible student, but you cannot claim
both in any year.
Each student can elect whether to claim the American Opportunity
or Lifetime Learning Credit, based on the credit with the
most tax benefit.
The tuition and fees deduction is also available to eligible
students. Either one of these credits or the deduction,
but not both, may be taken for any student in a year.
American Opportunity Credit
For 2009 and 2010, the Hope Credit is greatly expanded
and renamed the American Opportunity Credit. The credit
is worth up to $2,500 per student for four years of post-secondary
education, up from the Hope Credit's maximums of $1,800
and two years. The credit is now 40% refundable, up to $1,000,
so it can benefit even those with no tax liability.
For individual taxpayers, the American Opportunity Credit
phases out if modified adjusted gross income is between
$80,000 and $90,000. For married filing joint, the credit
phases out if MAGI is between $160,000 and $180,000. These
limits are higher than the Hope credit's limits, making
it available to more families.
Eligibility
- You must have paid qualified education expenses for yourself,
your spouse or your dependent.
- The student is completing the first four years of post-secondary
education at a qualified educational institution.
- The student is attending school to obtain an undergraduate
degree or other recognized education credential.
- The student is enrolled for at least half-time of one
academic period that began in the tax year.
- The student has no felony drug convictions.
Determining the Amount of Credit
For each student, the amount of the Hope Credit equals
the sum of:
-
100% of the first $2,000 of qualified
expenses paid for the eligible student
-
25% of the next $2,000 of qualified
expenses paid for the eligible student
The maximum credit that can be claimed is $2,500 per student
per year.
For more information see IRS
Publication 970.
Lifetime Learning Credit
The Lifetime Learning Credit provides a maximum non-refundable
tax credit of $2,000 per year for all students attending
an eligible educational institution in your household. The
Lifetime Learning Credit may be limited by your income and
amount of tax.
For individual taxpayers, the Lifetime Learning Credit
phases out if MAGI is between $50,000 and $60,000. For married
filing joint, the credit phases out if MAGI is between $100,000
and $120,000. These limits are significantly lower than
the American Opportunity Credit.
Eligibility
-
Any student enrolled in one or more
courses at an eligible educational institution.
-
There are no requirement to be seeking
a degree or to be enrolled at least half-time.
-
The institution can include nondegree
programs to acquire or improve job skills.
-
There is no limit on the number of
years you can claim the credit.
Determining the Amount of Credit
-
The amount of the Lifetime Learning
Credit is 20% of the first $10,000 paid for eligible education
expenses for all eligible students.
-
The maximum amount of credit is $2,000
per household.
-
The amount of the credit will be reduced
or eliminated if you exceed certain income levels.
Requirements to Claim
American Opportunity or
Lifetime Learning Credit
- You paid qualified higher education expenses for an eligible
student.
- The eligible student is you, your spouse or a dependent
for whom you are claiming an exemption.
- The expenses were paid for the current tax year or the
first three months of the succeeding tax year.
- Your filing status is single, head of household, qualifying
widow(er) or married filing jointly.
- You cannot be claimed as a dependent on another person's
tax return.
- You may claim either the American Opportunity Credit or
the Lifetime Learning Credit, or the tuition and fees deduction,
for each student in any given year.
- Expenses are for tuition and related expenses required
for enrollment or attendance at an eligible educational
institution.
- An eligible educational institution is a college, university,
vocational school or other post-secondary educational institution
eligible to participate in a student aid program administrated
by the Department of Education.
- Related expenses include student activity fees, expenses
for course-related books, supplies, and equipment included
in education expenses. These expenses must be paid to the
institution as part of enrollment or attendance requirements.
(Expenses for books and course-related supplies are treated
differently by each credit; see the descriptions above for
more information.)
- The expenses are not paid with a tax-free scholarship,
fellowship, grant or through an employer-provided education
assistance program. This includes Pell Grants and Veterans'
educational assistance.
- Room and board
- Insurance
- Transportation
- Medical expenses
- Expenses related to sports, games, hobbies, and non-credit
courses, unless the course is required as part of the degree
program
American Opportunity vs. Lifetime
Learning Credit
| American
Opportunity Credit |
|
Lifetime
Learning Credit |
| |
|
|
Up to $2,500 per eligible student |
|
Up to $2,000 credit per return |
|
|
|
Available only until the first four
years of
post secondary education are completed. |
|
Available for all years of post secondary
education and for courses to acquire or
improve job skills. |
| |
|
|
Available only for four years for
each eligible student. |
|
Available for an unlimited number of
years. |
|
|
|
Student must be enrolled at least
half-time in at least one academic period during the
year |
|
Available for one or more courses. |
|
|
|
Student must not have any felony
drug convictions on record |
|
Felony drug conviction rule doesn't
apply. |
To claim either credit, complete Form 8863 and attach the
form to your Form 1040 or Form 1040A.
For more information see IRS
Publication 970.
|
|
>
Filing Requirements
> Exemptions
> Itemized Deductions
> Federal Withholding
> Standard Deductions
> Tax Credits
> Education Credits
> Refund Cycle Chart |
