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)
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)