Overview
Two federal education credits are available to eligible taxpayers for tax year 2025: the American Opportunity Tax Credit (AOTC), worth up to $2,500 per eligible student for the first four years of post-secondary education, and the Lifetime Learning Credit (LLC), worth up to $2,000 per return for any number of years. Both are claimed on Form 8863.
Informational summary only. Figures reflect TY2025 law sourced from IRS publications and may change in subsequent years. Confirm current amounts and eligibility rules at irs.gov or with a qualified tax professional before filing.
What is the American Opportunity Tax Credit?
The American Opportunity Tax Credit is a federal tax credit available to eligible students during the first four years of post-secondary education at an eligible institution. The maximum credit is $2,500 per eligible student per tax year, calculated as 100 percent of the first $2,000 in qualified expenses plus 25 percent of the next $2,000 in qualified expenses.
A notable feature of the AOTC is that up to 40 percent of the credit — a maximum of $1,000 — is refundable. This means that if the credit reduces a taxpayer's tax liability to zero, up to $1,000 may be refunded directly.
Eligibility requirements for the AOTC include:
- The student must be pursuing a degree, certificate, or other recognized educational credential.
- The student must be enrolled at least half-time for at least one academic period beginning during the tax year.
- The student must not have completed the first four years of post-secondary education before the beginning of the tax year.
- The student must not have previously claimed the AOTC (or the Hope Credit, which the AOTC replaced) for more than four tax years.
- The student must not have a felony drug conviction at the end of the tax year.
Qualified expenses for the AOTC generally include tuition and required enrollment fees paid to an eligible educational institution. Books, supplies, and equipment required for a course of study may also qualify if they are required as a condition of enrollment or attendance. Room and board, insurance, medical expenses, and transportation costs generally do not qualify.
Expenses paid with tax-free funds — such as distributions from a 529 plan used for qualified education expenses, employer-provided educational assistance excluded from income, or tax-free scholarships — cannot be counted a second time toward the AOTC.
For more details, see the IRS page on the American Opportunity Tax Credit.
What is the Lifetime Learning Credit?
The Lifetime Learning Credit is a federal tax credit equal to 20 percent of up to $10,000 in qualified education expenses, for a maximum credit of $2,000 per tax return. Unlike the AOTC, the LLC is not limited to a fixed number of years and is not restricted to degree-seeking programs, making it available to a broader range of students and learners.
Key characteristics of the LLC:
- Available for an unlimited number of tax years — there is no four-year cap.
- Covers undergraduate education, graduate-level coursework, and courses taken to acquire or improve job skills, even if the student is not pursuing a degree or credential.
- The maximum credit is $2,000 per tax return, not per student. A family with two college students, for example, can still only claim a maximum of $2,000 total through the LLC in a single year.
- The LLC is nonrefundable. It can reduce a taxpayer's federal income tax liability to zero but will not generate a refund.
- There is no minimum enrollment requirement — the student does not need to be enrolled at least half-time.
Qualified expenses for the LLC include tuition and required enrollment fees. As with the AOTC, room and board do not qualify, and expenses covered by tax-free educational assistance cannot be double-counted.
For more information, see the IRS page on the Lifetime Learning Credit.
AOTC vs LLC — What Is the Difference?
The AOTC and LLC share some structural similarities — both appear on Form 8863, both require a Form 1098-T from the educational institution, and both have identical income phaseout ranges — but they differ in several meaningful ways. The table below summarizes the key distinctions.
| Feature | American Opportunity Tax Credit (AOTC) | Lifetime Learning Credit (LLC) |
|---|---|---|
| Maximum credit amount | $2,500 per eligible student | $2,000 per tax return |
| Credit rate | 100% of first $2,000 + 25% of next $2,000 | 20% of up to $10,000 in expenses |
| Number of years available | First four years of post-secondary education only | Unlimited number of years |
| Refundable? | Up to 40% refundable (max $1,000) | Nonrefundable |
| Enrollment requirement | At least half-time enrollment required | No minimum enrollment requirement |
| Degree requirement | Must be pursuing a degree or recognized credential | No degree requirement; job-skills courses qualify |
| Graduate school eligible? | No — first four undergraduate years only | Yes — graduate and professional courses qualify |
| MAGI phaseout (single/HoH) | $80,000 – $90,000 | $80,000 – $90,000 |
| MAGI phaseout (married filing jointly) | $160,000 – $180,000 | $160,000 – $180,000 |
| Both credits for same student, same year? | No — only one credit per student per year | |
A qualified tax professional can help evaluate which credit, if either, applies to a specific taxpayer's situation. See the directory of tax professionals at find a tax professional for assistance.
What Are the Income Limits for Education Credits?
Both the AOTC and the LLC phase out at the same modified adjusted gross income (MAGI) thresholds for TY2025:
- Single filers and heads of household: The credit phases out between $80,000 and $90,000 of MAGI. No credit is available if MAGI exceeds $90,000.
- Married filing jointly: The credit phases out between $160,000 and $180,000 of MAGI. No credit is available if MAGI exceeds $180,000.
- Married filing separately: Taxpayers who file with the married-filing-separately status are generally not eligible for either credit.
Within the phaseout range, the allowable credit is reduced proportionally. For example, a single filer with MAGI of $85,000 is at the midpoint of the phaseout range and would generally see the credit reduced by approximately 50 percent of the otherwise-allowable amount.
MAGI for purposes of these credits is generally adjusted gross income plus certain amounts that are otherwise excluded from income (such as foreign earned income exclusion amounts, Puerto Rico and American Samoa income exclusions, and certain deductions for student loan interest and tuition). Because the MAGI calculation can involve nuances, taxpayers near the phaseout thresholds may find it useful to review IRS Publication 970 or consult a qualified tax professional.
For additional context on credits that may interact with your tax return, see our overview of commonly missed tax deductions and the child tax credit for 2026.
How Do I Claim an Education Credit?
Education credits are claimed using Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). The completed form is attached to the taxpayer's federal income tax return (Form 1040).
Steps typically involved in claiming an education credit:
- Obtain Form 1098-T from the educational institution. Eligible institutions are generally required to send this form to students by January 31 of the following year. It reports amounts billed or paid for qualified tuition and related expenses during the tax year. Note that the amounts on Form 1098-T may not match the amounts the taxpayer actually paid — taxpayers should verify their own payment records. The IRS may require this form to claim the credit.
- Determine which credit applies. A taxpayer cannot claim both the AOTC and the LLC for the same student in the same year. If a student qualifies for both, only one may be chosen for that student in that tax year.
- Complete Form 8863. Part I covers the American Opportunity Credit; Part II covers the Lifetime Learning Credit. Part III collects student and institution information for each credit being claimed. The IRS provides instructions at About Form 8863.
- Transfer the credit amount to Form 1040. The credit calculated on Form 8863 flows to Schedule 3 and then to Form 1040. The refundable portion of the AOTC appears on a different line from nonrefundable credits.
- Retain supporting documentation. Taxpayers should keep records of tuition payments, Form 1098-T, and any scholarship or financial aid records that affect the calculation of qualified expenses.
Taxpayers who are unsure whether they qualify, or who have situations involving multiple students, 529 distributions, employer tuition assistance, or scholarships, may benefit from working with a qualified tax professional. The find a tax professional directory lists verified tax professionals who can assist with federal return preparation.
If you are still determining whether you are required to file a return, see our guide on do I need to file taxes.
Frequently Asked Questions
Can I claim both the AOTC and the LLC in the same year?
Not for the same student in the same tax year. A taxpayer may claim only one of the two education credits per eligible student per year. However, if a household has multiple students enrolled in post-secondary education, it may be possible to claim the AOTC for one student and the LLC for a different student on the same return, provided all other eligibility requirements are met for each.
Does graduate school qualify for an education credit?
Graduate-level coursework can qualify for the Lifetime Learning Credit, which has no restriction on the level of education and is available for an unlimited number of years. The American Opportunity Tax Credit, by contrast, is limited to the first four years of post-secondary education and generally does not apply to graduate school. Students enrolled in graduate or professional programs should evaluate their eligibility under the LLC.
What is Form 1098-T and do I need it to claim a credit?
Form 1098-T, Tuition Statement, is issued by eligible educational institutions and reports qualified tuition and related expenses for the tax year. The IRS generally requires taxpayers to obtain this form to claim either education credit. The form identifies the student, the institution's employer identification number, and the amounts billed or paid. If an institution did not issue a Form 1098-T, the taxpayer should contact the institution's bursar or student accounts office.
Do 529 plan distributions affect my education credit?
Expenses paid with tax-free distributions from a 529 plan cannot also be counted as qualified expenses for purposes of the AOTC or LLC. This rule prevents the same dollar of educational spending from generating two separate tax benefits. Taxpayers who use 529 funds and also seek to claim an education credit need to carefully track which expenses were covered by tax-free funds and which were paid out of pocket, as only the out-of-pocket portion may be eligible for the credit calculation.
What if my income is in the phaseout range — do I get a partial credit?
Yes. Taxpayers whose MAGI falls within the applicable phaseout range — $80,000 to $90,000 for single filers and heads of household, or $160,000 to $180,000 for married filing jointly — receive a proportionally reduced credit rather than no credit at all. The reduction is calculated as a fraction of the phaseout range that has been exceeded. Once MAGI exceeds the top of the range ($90,000 single; $180,000 MFJ), no credit is available for that year.