As per the IRS, an education credit aids the cost of higher education by decreasing the amount of tax owed on the tax return. You may receive a refund if the credit decreases the tax to less than zero. There are two types of educational credits, which are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
The maximum annual credit of AOTC is $2,500 per eligible student, with a refundable amount of up to $1,000. For degree-seeking students who are enrolled at least half-time, it covers the first 4 years of post-degree education. However, LLC offers a non-refundable maximum credit of $2,000 per tax return for a maximum credit of at least half-time.
For 2025, both credits phase out for higher-income taxpayers, with the credit disappearing for single filers with a Modified Adjusted Gross Income over $90,000 and joint filers over $180,000.
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Education Tax Credits
With the Education Tax Credit, there arise a lot of implications. The tax credit helps make higher education more affordable for individuals. According to the experts, by offering credit, education is available to a comprehensive range of audiences, which further leads to different economic benefits.
According to the officials of the IRS, “Unlike other education tax credits, AOTC is allowed for expenses for course‑related books, supplies, and equipment that aren’t necessarily paid to the educational institution … It also differs because you can claim the credit for 4 tax years instead of a limit on the number of years you can claim LLC.”
More About Education Tax Credit
The government of the United States provides the Education Tax Credits, which help individuals for coping up with the higher education prices. While filing the annual tax returns, they are claimed, which leads to the reduction of the amount of taxes that the government owes. To the wider range of population, this makes the education costs more accessible and affordable, and not just those with higher incomes.
By helping to offset the costs of higher education, these credits offer economic support to the learners or their families. This support can enhance the skilled workforce, improve the employability of students, and enhance enrolment rates.
Overview: Education Tax Credits
| Article On | Education Tax Credits: American Opportunity vs. Lifetime Learning |
| Country | United States |
| Department Name | Internal Revenue Service (IRS) |
| Credit Name | Education Tax Credit |
| Type of Education Tax Credit | American Opportunity Tax Credit (AOTC) Lifetime Learning Credit (LLC) |
| AOTC Maximum Amount | $2,500 |
| LLC Maximum Amount | $2,000 |
| Official Website | irs.gov |
American Opportunity Tax Credit (AOTC)
Per qualified student, the AOTC has a maximum value of $2,500, which can only be appealed during the first 4 years of enrolment in a post-secondary school. You are eligible to receive a refund of up to $1,000 if the credit reduced the taxes to zero.
AOTC: Eligibility Criteria
To be qualified for the AOTC, the student-
- Must be following a degree or any other acknowledged educational qualification.
- For at least 1 educational period that starts in the tax year, must be registered no less than half-time.
- At the start of the tax year, you must not have finished the first 4 years of higher education.
- For more than 4 tax years, individuals have not appealed the AOTC or the past Hope Credit.
- At the end of the tax year, those who do not have a lawbreaking drug conviction.
Income Limitations
With the eligibility criteria, the maximum adjusted income (MAGI) limitation should not exceed.
| Credit Amount | Single Filer Income Limits (MAGI) | Joint Filer Limits (MAGI) |
| Full Credit | $80,000 or less | $160,000 or less |
| Partial Credit | Over $80,000 but less than $90,000 | Over $160,000 but less than $180,000 |
| No Credit | Over $90,000 | Over $180,000 |
NOTE: You cannot claim the LLC, regardless of the income, if you are married but file separately.
According to the official, for the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. There is no limit on the number of years the lifetime learning credit can be claimed for each student.”
Eligible Expenses
You must incur the eligible educational expenses for yourself, spouse, or dependents to claim the AOTC. The eligible expenses are-
- Needed course material such as calculators, textbooks, etc.
- At an eligible education institution, the fees and tuition are required to enrol.
NOTE: In a qualified education outflow, the costs for supplies, books, and tools needed for a course of education are included, even if they are not paid straight to the school.
Lifetime Learning Credit
Over the years, it can be claimed, the Lifetime Learning Credit (LLC) has no limit. The qualified education expenses have the maximum credit amount, which is $2,000 or 20% of the first $10,000. LLC is not like AOTC, as it is non-refundable.
Eligibility: Lifetime Learning Credit (LLC)
One needs to fulfil the conditions to claim the LLC.
For higher schooling, you, your dependent, or a 3 party pays qualified education outlays.
- The qualified apprentice is yourself, your partner, or a relative registered on the tax return.
- For a qualified apprentice who joined at an eligible education institution, you, your dependent, or a third party paid the education expenses.
Income Limitations
| Credit Amount | Single Filer Income Limits (MAGI) | Joint Filer Limits (MAGI) |
| Full credit | $80,000 or less. | $160,000 or less. |
| Partial credit | More than $80,000, but less than $90,000. | More than $160,000, but less than $180,000. |
| Ineligible for the credit. | $90,000 or more. | More than $180,000. |
According to the experts, “The LLC is more flexible than the AOTC, as it can be used for undergraduate, graduate, or professional degree courses. … Unlike the AOTC, the LLC is non-refundable.”
Eligible Expenses
At an eligible education institution, the eligible costs under the LLC include tuition and necessary charges. Textbooks and other course resources may also be suitable, but only if they are essential to be acquired directly from the school.
SNAPSHOT Table: American Opportunity Credit and Lifetime Learning Credit
| Feature | American Opportunity Tax Credit (AOTC) | Lifetime Learning Credit (LLC) |
| Max Credit | Up to $2,500 per student | Up to $2,000 per tax return |
| Refundable? | Yes, up to $1,000 (40%) | No – non-refundable only |
| Eligible Education Level | Undergraduate only (first 4 years) | Any level – undergrad, grad, or non-degree |
| Enrolment Requirement | At least half-time | Any enrolment – even one course |
| Income Phase-out (MAGI) | $80k–$90k (single) / $160k–$180k (joint) | $80k–$90k (single) / $160k–$180k (joint) |
| Felony Drug Conviction Rule | Disqualifies you | No impact |
| Who Can Claim | You, your spouse, or your dependent | Same |
FAQs
What do you understand by the American Opportunity Tax Credit(AOTC)?
In the first year of advanced education, AOTC is a refundable credit of up to $2,500 for qualified students.
What do you understand by the Lifetime Learning Credit?
LLC is defined as a non-refundable credit of nearly $2,000 for the eligible expenses and is available for an unlimited number of years.
Can one claim for the AOTC and LLC at the same time?
No, both the education tax credits cannot be appealed at the same time. For a similar student in the same tax year, only one education tax credit can be claimed.
Is the credit amount of the AOTC refundable?
Yes, nearly $1,000 of AOTC is refundable.
How long will LLC be claimed?
There is no edge to the number of years for claiming the LLC.