Tax season doesn’t have to be intimidating—especially if you’re a college student. In fact, it could be your chance to save big. If you’re paying for higher education, the U.S. tax system offers valuable credits that can significantly reduce your tax bill or even boost your refund.
This guide breaks down everything you need to know in a way that’s clear, actionable, and easy to follow.
Why Tax Credits Matter for College Students?
Tax credits are more than just deductions. While deductions reduce your taxable income, tax credits directly lower the amount of tax you owe. For a student juggling tuition, books, and living costs, a tax credit could mean hundreds—or even thousands—of dollars back in your pocket.
The Two Most Valuable Tax Credits for Students
The IRS currently offers two primary education tax credits that benefit students:
- American Opportunity Tax Credit (AOTC)
- Lifetime Learning Credit (LLC)
Let’s break them down.
American Opportunity Tax Credit (AOTC)
The AOTC is often the most beneficial tax credit for undergraduates. Here’s why:
- Value: Up to $2,500 per student annually
- Eligibility: Only available during the first four years of post-secondary education
- Refundable: 40% of the credit (up to $1,000) is refundable, meaning you can receive it even if you owe no taxes
To qualify, you must:
- Be pursuing a degree or recognized credential
- Be enrolled at least half-time for one academic period during the year
- Not have finished your first four years of higher education
- Not have claimed the AOTC for more than four tax years
- Have a modified adjusted gross income (MAGI) under $90,000 ($180,000 for joint filers)
Lifetime Learning Credit (LLC)
Unlike the AOTC, the Lifetime Learning Credit is available for both undergraduate and graduate students—and there’s no limit on the number of years you can claim it.
- Value: Up to $2,000 per tax return
- Eligibility: No degree pursuit requirement—great for part-time students or professionals seeking to enhance their skills
- Non-refundable: You can only use the credit to reduce your taxes, not to get a refund
To qualify, your MAGI must be under $90,000 ($180,000 for joint filers).
Can You Claim Both the AOTC and LLC?
No, you can’t claim both credits for the same student in the same year. You’ll have to choose one based on which offers you the most benefit. However, if you have multiple dependents in college, you can claim the AOTC for one and the LLC for another.
How to Claim These Tax Credits?
To claim either credit, you’ll need:
- Form 1098-T: This form is provided by your school and shows tuition payments and other required expenses
- IRS Form 8863: Use this to calculate and claim either the AOTC or LLC
When filing your taxes—either by yourself, with software, or with a professional—be sure to include Form 8863. IRS guidelines can be found directly here for AOTC and here for LLC.
Expenses That Qualify for Tax Credits
Eligible education expenses include:
- Tuition and enrollment fees
- Books and course materials (AOTC only)
Room and board, transportation, and medical insurance do not qualify. Always keep your receipts and documentation to prove your expenses.
Who Can Claim the Credit?
If you’re a dependent, your parents will typically claim the education credit. If you’re independent and responsible for your own expenses, you can claim it yourself.
Other Tax Benefits for Students
Besides education credits, you might qualify for other student-related tax benefits:
- Student Loan Interest Deduction: Deduct up to $2,500 of student loan interest paid
- Tuition and Fees Deduction: Although expired federally in 2020, some states still offer this deduction
- Scholarships and Grants: Generally not taxable if used for qualifying expenses
Common Mistakes to Avoid
Even small errors can cost you hundreds. Watch out for:
- Claiming both credits for the same student
- Not submitting Form 8863
- Claiming the credit without proper documentation
Double-check your eligibility each year and keep all records handy in case of an IRS audit.
Using Tax Software for Students
Popular tax software like TurboTax or H&R Block often offer free or low-cost filing options for students. These platforms walk you through the process and help you choose the most beneficial credit.
Tax Credits vs. Tax Deductions
Let’s quickly compare the two:
| Feature | Tax Credit | Tax Deduction |
|---|---|---|
| Effect | Reduces tax owed dollar-for-dollar | Reduces taxable income |
| Example | AOTC ($2,500) | Student loan interest deduction ($2,500) |
| Refundable | Some credits are refundable | Not refundable |
When to File Taxes as a Student?
Even if you’re not required to file, doing so might be a smart move. If you qualify for a refundable tax credit like AOTC, filing your taxes is the only way to receive your refund.
What If I Didn’t Receive a 1098-T?
Some schools don’t send a 1098-T until February, and certain students might not receive one at all. If you didn’t get yours, check your student portal or contact your college’s financial aid office.
FAQ About Student Tax Credits
Can I claim both AOTC and Lifetime Learning Credit?
No, you can’t claim both for the same student in the same year. Choose the one that gives you the greater benefit.
Are education tax credits available for graduate school?
Yes, the Lifetime Learning Credit is ideal for graduate students and working professionals.
Can international students claim these credits?
Generally, no. Most international students don’t meet the residency requirements for these credits.
Can I claim tax credits if I paid tuition using loans?
Yes. The source of the money doesn’t matter—as long as the expenses were paid, you can claim them.
What if my parents paid my tuition?
If you’re a dependent, your parents may be able to claim the credit. If you’re independent, you can claim it yourself—even if someone else paid your tuition.
Are books covered by tax credits?
Only under the AOTC—and only if they’re required for coursework.
Can I claim the credit if I didn’t earn income?
Yes, especially with the AOTC, which is partially refundable—even if you don’t owe taxes.
Do part-time students qualify?
AOTC requires at least half-time enrollment. The LLC does not, making it ideal for part-time students.
What happens if I claim the credit incorrectly?
You could face a delay in your refund, a denied claim, or even an IRS audit. Be accurate and keep records.
Where can I get more help?
Visit the IRS website for students for the latest updates and detailed guidance.
Conclusion
Claiming education tax credits can be a game-changer for college students trying to make every dollar count. Whether you’re an undergraduate claiming the American Opportunity Tax Credit or a grad student utilizing the Lifetime Learning Credit, these benefits can ease the financial burden of higher education.
Don’t let this opportunity slip through the cracks. File early, gather your documents, and take full advantage of the resources available to you.
