Education Credits–AOTC and LLC

Higher Education Credits

Your clients may qualify for either of two education tax credits if they paid for higher education for themselves or immediate family members. Both the American Opportunity Credit (AOTC) and the Lifetime Learning Credit (LLC) may reduce the amount of taxes they owe, but only the American Opportunity Credit is partially refundable. 

The AOTC is worth up to $2,500 per year for an eligible student. This credit applies for the first four years of higher education. Forty percent of the AOTC is refundable. The LLC is worth up to $2,000. There is no limit on the number of years that a taxpayer can claim the LLC for an eligible student.

Taxpayers must complete Form 8863, Education Credits, and file Form 1040 or 1040A to claim these credits. 

Note to Tax Pros: An institution of higher education school should provide your client Form 1098-T, Tuition Statement, showing expenses paid for the year. The amounts shown on the form may be different than the amount your client actually paid. When figuring the credit, be sure to verify whether the client paid any additional qualified education expenses not shown on the form. Form 1098-T contains information needed to complete Form 8863.

Learn more by visiting the IRS education benefits and EITC Refundable Credits Web pages or reading Publication 970, Tax Benefits for Education.

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