The short answer
Two federal tax credits help pay for college and job training. The American Opportunity Tax Credit, AOTC, is worth up to $2,500 per student a year for the first four years of college, and up to $1,000 of it is refundable, so it can be paid even if you owe no tax. The Lifetime Learning Credit, LLC, is worth up to $2,000 per tax return a year for any college course or job-skills training, with no limit on the number of years, but it is not refundable. Both phase out between $80,000 and $90,000 of modified adjusted gross income, or $160,000 to $180,000 for married couples filing jointly, and neither can be claimed on a married-filing-separately return. You can claim only one of the two for the same student in the same year. You claim them on Form 8863, using the Form 1098-T your school sends, and only for expenses not covered by tax-free scholarships or grants.
The two credits side by side
Swipe sideways to see the whole table.
| How they compare | American Opportunity Tax Credit | Lifetime Learning Credit |
|---|---|---|
| Most it can be worth | $2,500 per student | $2,000 per tax return |
| How it is figured | 100% of the first $2,000 of expenses, 25% of the next $2,000 | 20% of the first $10,000 of expenses |
| Refundable? | Up to $1,000 of it | No |
| Years you can claim it | Four per student | No limit |
| Who it is for | Students in the first four years of a degree or credential, at least half time | Any college course, graduate study or job-skills training |
| Books and supplies | Count, even if not bought from the school | Count only if they must be bought from the school |
| Income phase-out (2026) | $80,000 to $90,000; joint $160,000 to $180,000 | The same |
The two share most of their other rules: neither can be claimed on a married-filing-separately return or by someone who can be claimed as a dependent, both are claimed on Form 8863, and both count only expenses not paid with tax-free aid.
When the American Opportunity credit is the one
For a student in the first four years of college, the AOTC is almost always larger, and because up to 40 percent of it is refundable, a family that owes little or no tax can still receive up to $1,000. The student must:
- be pursuing a degree or other recognized credential;
- be enrolled at least half time for at least one academic period starting in the year;
- not have finished the first four years of higher education at the start of the year;
- not have had the AOTC claimed for them for more than four tax years; and
- not have a felony drug conviction at the end of the year.
The four-year count is per student and per tax year, so a student who took a gap year or claimed the credit in a year with only one semester has used one of the four. Starting with 2026 returns, the 2025 tax law requires a Social Security number, not an individual taxpayer identification number, to claim the AOTC; the student needs one too, issued by the return's due date, and the school's employer identification number goes on Form 8863.
When the Lifetime Learning credit is the one
The LLC has no limit on years and no requirement to be in a degree program or enrolled half time. It covers graduate school, a fifth year of college, and courses taken to get or improve job skills, such as a certificate class at a community college. That makes it the credit for adults returning to study and for anyone past the AOTC's four years.
Two limits make it smaller. It is nonrefundable, so it can lower your tax to zero but not produce a refund. And the $2,000 cap applies to the whole return, so a family with several students in LLC-eligible study shares one cap, while the AOTC gives each eligible student their own $2,500.
One return, both credits
Example (hypothetical): a parent and a first-year student
A couple pays $4,500 in tuition and fees for their daughter's first year of college, with no scholarship, and claims her as a dependent. One of them also takes two evening bookkeeping courses at a community college for $3,000.
For the daughter they claim the AOTC: $2,000 plus 25 percent of the next $2,000, or $2,500. For the parent's courses, which are not part of a degree, they claim the LLC: 20 percent of $3,000, or $600. Their credits total $3,100, and if their tax is less than that, up to $1,000 of the AOTC can still be refunded. Had they used the LLC for the daughter, it would have been worth only $900, and it would have shared one cap with the parent's courses.
You can claim only one credit per student per year, but different students on the same return can use different credits, as here.
Income limits, and who claims the credit
Both credits phase out over the same ranges of modified adjusted gross income: $80,000 to $90,000 for single filers, heads of household and qualifying surviving spouses, and $160,000 to $180,000 for married couples filing jointly. Within the range the credit is reduced in proportion, so a single filer with $85,000 gets half; above the top, neither can be claimed. These ranges are not adjusted for inflation.
If the student is your dependent, you claim the credit, even if the student paid the expenses. If no one claims the student as a dependent, the student can claim it. For parents who are divorced or separated, the parent who claims the student as a dependent is the one who can claim the credit. Students under 24 who are subject to the tax rules for children's investment income generally cannot receive the refundable part of the AOTC.
Which expenses count
Qualified expenses are tuition and fees required for enrollment at an eligible school, generally any accredited college, university or vocational school that takes part in federal student aid. Student activity fees count only when paying them is a condition of enrollment. Room and board, transportation, insurance and medical fees do not count for either credit.
Subtract tax-free help first. Expenses paid with a Pell Grant, scholarship, employer education assistance or a tax-free 529 plan withdrawal cannot also be used for a credit. In some cases a student can choose to treat part of a scholarship as taxable income used for living costs, freeing tuition to qualify for the AOTC, which can increase the family's total benefit; tax software and IRS Publication 970 explain how.
Claiming the credit
Complete Form 8863 and attach it to Form 1040. Your school generally sends Form 1098-T by January 31 showing payments and scholarships, but the amounts you actually paid, not the form, decide the credit, so keep receipts and statements. If you missed a credit, you can generally claim it within three years by amending that year's return; see our guide to unclaimed tax refunds.
Help that is often worth more
Federal student aid, Pell Grants, work-study and federal student loans, applied for through the FAFSA, is separate from tax credits and often larger. Other tax breaks also help: a deduction of up to $2,500 a year of student loan interest, reduced at higher incomes; up to $5,250 a year of tax-free education assistance from an employer, for tuition or student loan payments; and tax-free 529 plan withdrawals, which must not overlap with expenses used for a credit. Working students with modest incomes should also look at the EITC, and the Saver's Credit rewards retirement saving.
Timing and paperwork questions
Do I need a Form 1098-T to claim an education credit?
Generally yes: you or the student must have received one from the school, with limited exceptions, such as a school that is not required to send it. If it has not arrived, ask the school's billing office before you file.
I paid in December for classes that start in January. Which year counts?
The year you paid. Expenses paid in one year for an academic period that begins in the first three months of the next year count in the year of payment, and cannot be counted again the next year.
What happens if the school refunds tuition after I claimed the credit?
If the refund comes in a later year, you generally add back the part of the credit the refunded amount produced, as extra tax on that later year's return. A refund in the same year simply reduces your qualified expenses.
What this guide cannot settle
The credits depend on your income, the student's enrollment and the expenses you paid after tax-free aid. This guide gives the rules, not a personal figure, and is not tax advice; the Form 8863 instructions and Publication 970 have the details.
Official sources
Before you open Form 8863
Collect each student's Form 1098-T and your own payment records, subtract scholarships and other tax-free aid, and decide which credit fits each student. If you work and have a modest income, estimate your EITC for the same return.
