Higher Education Tax Credit

If you pay for higher education in 2021, it’s possible that Higher Education Tax Credits may be available to you to offset the costs of community college, trade school, a four-year university or an advanced degree. These tax credits can reduce the taxes you owe, or even result in a refund.

There are two higher education credits available to taxpayers: the American Opportunity Tax Credit (AOTC) (up to $2,500 credit per eligible student) and the Lifetime learning Credit (up to $2,000 credit per tax return)  

To qualify for either tax credit, you must complete and submit Form 8863, Education Credits. To determine if you are eligible, consider using the IRS Interactive Tax Assistance tool.

Common Provisions for the Two Credits

  • You, your dependent or a third party pay qualified education expenses for higher education
  • You, your dependent or a third party pay qualified education expenses for an eligible student enrolled at an eligible educational institution
  • The eligible student is you, your spouse or a dependent listed on your tax return
  • A taxpayer (or a dependent) received Form 1098-T, Tuition Statement, from an eligible educational institution, (domestic or foreign).

Who is Eligible for the American Opportunity Tax Credit?

  • Student pursuing a degree or other recognized education credential
  • Student enrolled at least half time for at least one academic period beginning in the tax year
  • Student did not complete the first four years of higher education at the beginning of the tax year
  • Student did not claim the AOTC or the former Hope credit for more than four tax years
  • Student does not have a felony drug conviction at the end of the tax year.
  • Taxpayer whose modified adjusted gross income is between $80,000 and $90,000 (between $160,000 and $180,000 for married filing jointly (MFJ)) will receive a reduced credit. Full claim eligibility is $80,000 or less ($160,000 or less for MFJ)

Who is Eligible for the Lifetime Learning Credit?

  • Student is enrolled or taking courses at an eligible educational institution
  • Student is taking higher education course(s) to get a degree or other recognized education credential, or to get or improve job skills
  • Student is enrolled for at least one academic period beginning in the tax year
  • Taxpayers whose modified adjusted gross income is between $59,000 and $69,000 (between $118,000 and $138,000 for married filing jointly (MFJ)) will receive a reduced credit. Full claim eligibility is less than $59,000 (less than $118,000 for MFJ)

For more information, please visit Compare Education Credits, Tax Benefits for Education or contact us at 401-831-0200.

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