American Opportunity Credit & Lifetime Learning Credit

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If you enrolled and attended college last year you may be able to use this education credit to reduce your tax liability. You will receive a tuition statement, Form 1098-T from an eligible educational institution. This form is used to show the educational costs you or your parent paid for you to attend college during the tax year. You should receive this form by January 31st and you will need Form 1098-T to claim an education credit.

The education credits you may be able to claim are: the American Opportunity Credit and the Lifetime Learning Credit. If your educational institution did not send Form 1098-T by mail or email, you should contact your college and request it be sent to your address before filing your taxes.

What Do I Need to Know About This Form?

On this form in Box 1 – Payments received for qualified tuition and related expenses, there will be an amount paid to the college, for example, it may say $10,500. In Box 5 – Scholarships or grants, there may be an amount received that was applied to the cost of the tuition. For example, it may say $5,000. At this point, you should subtract box 5 from box 1 because scholarships and grants are not included as part of qualified expenses because they are tax free.

Box 1  $10,500 (qualified tuition and related expenses)

Box 5   $ - 5,000 (scholarships or grants)

$ 5,500 (adjusted qualified education expenses)

This amount of $5,500 is considered “Qualified Expenses,” and will be the amount used to calculate an education credit for you. The education credit may be refundable or nonrefundable.

Box 1 does not necessarily include all amounts paid, for example, you may have also had out-of-pocket expenses like course related books, equipment, student activity fees and other supplies.

Qualified Expenses

To qualify for the American Opportunity Credit, qualified expenses are tuition and other expenses related to enrollment and attendance such as, enrollment fees, student activity fees and course materials and you may claim up to $2,500 if qualified. This credit is partially refundable.

For the Lifetime Learning Credit, qualified expenses include tuition, required enrollment fees, course-related supplies, books and equipment and you may claim up to $2,000 if qualified. This credit is nonrefundable.

The tax software you are using will recommend which credit is the most beneficial for you. Make sure to retain this form and all other supporting documents. These are your records.

Information in this article is intended for educational purposes to provide general tax information; it does not provide you with tax advice or law. We do not provide specific counsel to you on deductions, business income or expenses. It is recommended to seek your tax professional or consultant on your specific tax and/or financial matters.

Information derived from Publication 970 and Your Federal Income Tax (2024).