American Opportunity Tax Credit and Lifetime Learning Credit Explainer

The AOTC (American Opportunity Tax Credit) and the LLC (Lifetime Learning Credit) are both tax credits issued for eligible education expenses. Because these credits are separate from one another, they carry their own eligibility criteria and cannot be claimed together.

Below you’ll find details on who can claim the AOTC and the LLC and how much of a credit you can collect for each.

The AOTC can be claimed by undergraduate students or their parents when they file their taxes. You can collect a maximum annual credit of $2,500 for the first four years you attend college.

Parents who paid for their children's qualifying educational expenses and claimed them as dependents can usually claim the credit on taxes given they meet the eligibility criteria.

With the AOTC, you can claim 100 percent of the first $2,000 spent on qualified education expenses. You can also claim 25 percent of the next $2,000 that was paid toward these expenses. Qualifying educational expenses typically include:

• Tuition
• Enrollment fees
• Course materials such as books and equipment

Students who meet the following criteria can generally claim the AOTC on taxes:

• Your (or your parents) income must be $80,000 or less, or $160,000 if you’re filing taxes jointly with your spouse.*
• You must be pursuing a degree or other recognized education credential such as a certification in a particular field.

• Your enrollment status must be at least half-time for at least one academic period beginning in 2021.
• Students claiming the credit cannot have any felony drug convictions listed on their records at the end of 2021.
• You must have received a 1098-T Tuition Statement.

*You may be able to claim a lesser amount of the AOTC if your MAGI (Modified Adjusted Gross Income) is over $80,000, but under $90,000. Or, your MAGI is over $160,000, but less than $180,000 for joint filers.

When you claim the AOTC and it brings the amount of tax you owe to zero, you’re entitled to a refund of up to $1,000.

The LLC is similar to the AOTC as it allows you to claim credit for things like college tuition and fees necessary for enrollment or attendance. However, the credit amount differs as does the eligibility criteria. Here’s a look at how the LLC differs from the AOTC.

• With the LLC, you can only collect a maximum of $2,000 per return, not per eligible student.
• The MAGI limit is much lower for the LLC than the AOTC. For the LLC, your MAGI cannot exceed $69,000 for single filers and $138,000 if you file a joint return.
• If you have a felony drug conviction on your record in 2021, you can still claim the LLC.

• You aren’t required to be enrolled in school at least half-time. Instead, you must be enrolled in one or more courses.
• You don’t need to be pursuing a degree or other recognized education credential.

• Unlike the AOTC that only allows you to claim the credit for the first four years of post-secondary education, the LLC can be claimed for as long as you qualify to receive it.
• The LLC only helps to reduce your taxable income. It won’t entitle you to a tax refund.

If you’re looking to claim the LLC on taxes, you’ll need to be sure you (or the student you claim on taxes) meets the following criteria:

• You must be enrolled in a course at an eligible educational institution.
• You must have received a 1098-T Tuition Statement.

• You must be taking a higher education course(s) or classes that will amount to a degree, another recognized education credential, or help you to improve your job skills.
• You must be enrolled in at least one academic period for the tax year you’re looking to claim the credit for.

The AOTC and the LLC can be claimed on the same tax return, but not for the same student, according to the IRS. Students (or parents) who are looking to claim an education tax credit will need to choose either the AOTC or the LLC, given they are entitled to claim both. The only time a parent can claim both education credits on taxes is when they apply to different students and aren’t for the same qualified expenses.

It's worth noting that you won’t be able to claim either the AOTC or LLC if you file your tax return married filing separately. You and your spouse also cannot be a nonresident alien unless you are “treated as a resident alien for tax purposes,” according to the IRS.