American Opportunity Tax Credit (AOTC) vs. Lifetime Learning Credit (LLC)
Here’s how the AOTC and LLC compare based on current IRS requirements:
| Feature | American Opportunity Tax Credit | Lifetime Learning Credit |
|---|---|---|
| Maximum credit | $2,500 per eligible student | $2,000 per tax return |
| Refundability | Partially refundable — up to 40%, or $1,000, may be refundable | Non-refundable |
| Lifetime limit | Four tax years per student | No limit on years claimed |
| Academic levels | Undergraduate, early post-secondary education | Undergraduate, graduate, professional and job-skills courses |
| Enrollment threshold | At least half-time for one academic period | At least one eligible course; no half-time requirement |
| Eligible expenses | Tuition, required fees, books, supplies and course equipment | Tuition and required fees; course materials generally qualify only when paid directly to the school as a condition of enrollment |
| Income limit | $90,000 for single filers (phase-out begins at $80,000); $180,000 for joint filers (phase-out begins at $160,000) | $90,000 for single filers (phase-out begins at $80,000); $180,000 for joint filers (phase-out begins at $160,000) |
| Criminal-record restriction | Can’t have a felony drug conviction at the end of the tax year | No comparable felony drug restriction |
Source: Internal Revenue Service
Per Student vs. Per Return Limitations
- AOTC: The limit applies separately to each eligible student. A family with two qualifying undergraduate students could potentially receive up to $5,000.
- LLC: The limit applies to your entire tax return. Even when several family members have eligible expenses, the combined credit can’t exceed $2,000.
”No Double-Dipping” Coordination Clause
You can’t claim both credits for the same student during the same tax year, even when the student has enough expenses. You also can’t use the same expenses for an education credit and another tax benefit.
However, you can claim the credits for different students. For example, Maria could claim the AOTC for her daughter, who is a college freshman, and the LLC for her spouse, who is taking an eligible professional-development course.
Required Documentation for Filing
- Form 1098-T: The school will typically provide Form 1098-T, which reports tuition payments.
- Form 8863: Use Form 8863 to calculate the AOTC or LLC and submit it with your federal income tax return.
When the AOTC Might Be Better
The AOTC is typically more beneficial if:
- The student is in the first four years of postsecondary education.
- The student attends school at least half-time.
- You want the higher, partially refundable credit.
- You have multiple eligible students.
When the LLC Might Be Better
The LLC is typically more beneficial if:
- The student is in graduate school or continuing education.
- The student attends less than half-time.
- The course improves job skills.
- The AOTC has already been claimed for four years.
