If you have children or grandchildren in or preparing for college, there are two important college tax credits you need to know about:
- American Opportunity Tax Credit
The American Opportunity Tax Credit, (AOTC) can be worth a maximum annual benefit of $2,500 per eligible student. The credit is only available for the first four years at an eligible college or vocational school for students pursuing a degree or another recognized education credential. Taxpayers can claim the AOTC for a student enrolled in the first three months of 2018 as long as they paid qualified expenses in 2017.
- Lifetime Learning Credit
The Lifetime Learning Credit, (LLC) can have a maximum benefit of up to $2,000 per tax return for both graduate and undergraduate students. Unlike the AOTC, the limit on the LLC applies to each tax return rather than to each student. The course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. The credit is available for an unlimited number of tax years.
These two college tax credits apply to students enrolled in an eligible college, university or vocational school. Eligible students include the taxpayer, their spouse and dependents.
To claim the AOTC or LLC, use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). Additionally, to claim AOTC, law requires taxpayers to provide the school’s Employer Identification Number on the form.
Form 1098-T, Tuition Statement, is required to be eligible for an education benefit. Students receive this form from the school they attended. There are exceptions for some students.