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February 26, 2010
Education Tax Credits
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If you are taking classes, you might qualify for an education tax credit.
Three credits are the American Opportunity Tax Credit, the Hope Credit, and the Lifetime Learning Tax Credit. Only one of them can be claimed in the same year for the same student. Additionally, it is important to note that you cannot claim the American Opportunity Tax Credit for 1 eligible student and the Hope Credit for another student in the same year. If you would like to claim either the Hope or American Opportunity Tax Credit for the year, you must use the same credit for all eligible students.
Although there is no limit on how many years taxpayers can claim the Lifetime Learning Credit, the Hope Credit and American Opportunity Tax credits do have limits. The Hope Credit can only be claimed a maximum of 2 years and only for the first 2 year of post secondary education per eligible student. The American Opportunity Tax Credit may only be claimed for a maximum of 4 tax years (which includes any year the Hope Credit was claimed) and only for the first 4 years of post secondary education per eligible student.
Making a Choice
There are different rules and amounts for each of these credits. The following table breaks down some of these differences.
| Type of Credit | Hope Credit | Lifetime Learning Credit | American Opportunity Tax Credit |
|---|---|---|---|
| Maximum | $1,800 maximum ($3,600 for student enrolled in a Midwest disaster area) | $2,000 maximum. Please note that additional credits may be available for students enrolled at an eligible Midwestern disaster area. Refer audience to Publication 970. | $2,500 per eligible student |
| How It Is Measured | 100% of the first $1,200 spent on eligible expenses for student ($2,400 for Midwest disaster area students) and 50% of second $1,200 spent on eligible expenses for student ($2,400 for Midwest disaster students) | Only 20% of the first $10,000 paid for all student dependents | 100% of the first $2,000 spent on eligible expenses for student. And 25% of the second $2,000 of eligible expenses spent for student. |
| Years It Can Be Claimed | Can only be claimed for 2 years and for the first 2 years of post secondary education | Available for all years of postsecondary education and for courses to acquire or improve job skills. | Can only be claimed for 4 tax years per eligible student, and is available for only the first 4 years of post-secondary education per student. Those 4 years claimed include any years the Hope Credit was claimed. |
| Enrollment Requirement | Must be enrolled at least half time for at least 1 academic period that began during the tax year. At least 1 student must be enrolled at an eligible Midwestern disaster area school. | Must be enrolled in at least 1 course. | Must be enrolled at least half time for at least 1 academic period that began during the tax year. |
| Degree Requirement | Must be pursuing an undergraduate degree or other recognized education credential. | Do not have to be pursuing an degree or other recognized education credential. | Must be pursuing an undergraduate degree or other recognized education credential. |
Find out more about tax deductions and credits, or if you have other tax questions, please consult your tax professional. For additional information about this tax credit please see IRS Publication 970.
This document was prepared for informational purposes only and cannot be considered tax advice or otherwise. Please see your tax professional for additional guidance.
