American Opportunity Tax Credit and Other Education Tax Credits for 2023

Claim the American Opportunity Tax Credit or Lifetime Learning Credit if you had eligible higher education expenses in 2023.

Ryan Lane
Assigning Editor | Small business, student loans

Ryan Lane is an editor on NerdWallet’s small-business team. He joined NerdWallet in 2019 as a student loans writer, serving as an authority on that topic after spending more than a decade at student loan guarantor American Student Assistance. In that role, Ryan co-authored the Student Loan Ranger blog in partnership with U.S. News & World Report, as well as wrote and edited content about education financing and financial literacy for multiple online properties, e-courses and more. Ryan also previously oversaw the production of life science journals as a managing editor for publisher Cell Press. Ryan is located in Rochester, New York.

Chris Hutchison helped build NerdWallet's content operation and has worked across banking, investing and taxes. He now leads a team exploring new markets. Before joining NerdWallet, he was an editor and programmer at ESPN and a copy editor at the San Jose Mercury News.

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The American Opportunity Tax Credit and the Lifetime Learning Credit are federal tax credits that can lower your upcoming tax bill if you paid for college in 2023.

You can claim these education tax credits as a student if you're not claimed as a dependent on anyone else's tax return. Parents can claim the credit for a student who is a dependent. Spouses can claim the credit if they use the married filing jointly status .

Here's what you need to know about the American Opportunity Tax Credit, Lifetime Learning Credit and education tax forms.

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What is the American Opportunity Tax Credit?

The American Opportunity Tax Credit is a federal tax credit that allows you to lower your tax bill by up to $2,500 if you paid that much in undergraduate education expenses last year.

How the American Opportunity Tax Credit works

The American Opportunity Tax Credit lets you claim all of the first $2,000 you spend on eligible education expenses, plus 25% of the next $2,000, for a total of $2,500. Qualified expenses include:

You may not claim living expenses or transportation costs.

Who can claim the American Opportunity Tax Credit?

The American Opportunity Tax Credit is for undergraduate college students only. To qualify, students must meet the following criteria, according to the IRS:

As a student, you can claim the credit on your taxes for a maximum of four years as long as no one else, like your parents, claims you as a dependent on their tax returns. Parents will claim the credit, instead of the student, if they paid for the student's education expenses and have the student listed as a dependent on their return.

Your 2023 modified adjusted gross income, or MAGI, determines how much of the American Opportunity Tax Credit you can claim:

MAGI (single filer)

MAGI (married filing jointly)

American Opportunity Tax Credit eligibility

More than $80,000, but less than $90,000.

More than $160,000, but less than $180,000.

More than $180,000.

Ineligible for the credit.

What the American Opportunity Credit is worth

The American Opportunity Tax Credit lowers the amount of taxes you pay. For example, if you owe $3,000 in taxes and get the full $2,500 credit, you’ll only have to pay $500 to the IRS.

Is the American Opportunity Tax Credit refundable?

Yes, it's refundable. You can still receive 40% of the American Opportunity Tax Credit's value — up to $1,000 — even if you earned no income last year or owe no tax. For example, if you qualified for a refund, this credit could increase the amount you'd receive by up to $1,000. That's why the American Opportunity Tax Credit is typically the best education tax break for students and their families.

What is the Lifetime Learning Credit?

The Lifetime Learning Credit is a a federal tax credit that can reduce your taxable income by up to $2,000 if you're pursuing an undergraduate, graduate, vocational or non-degree program. Unlike the American Opportunity Tax Credit, there's no limit to the number of tax years in which you can claim this credit.

How the Lifetime Learning Credit works

You can claim 20% of the first $10,000 you paid toward 2023 tuition and fees, for a maximum of $2,000 each year.

Course supplies, living expenses and transportation costs are not qualified expenses for the Lifetime Learning Credit.

Who can claim the Lifetime Learning Credit?

The Lifetime Learning Credit is ideal for graduate students or anyone taking classes to develop new skills, even if you already claimed the American Opportunity Tax Credit on your taxes in the past.

Students can claim the Lifetime Learning Credit for themselves if they file their own taxes. Parents of dependent students can also claim the credit.

To qualify for the Lifetime Learning Credit, you must meet the following criteria, according to the IRS:

Be taking higher education courses to get a degree or other recognized education credential or to get or improve job skills.

Your 2023 modified adjusted gross income, or MAGI, determines how much of the Lifetime Learning Credit you can claim:

MAGI (single filer)

MAGI (married filing jointly)

Lifetime Learning Credit eligibility

More than $80,000, but less than $90,000.

More than $160,000, but less than $180,000.

More than $180,000.

Ineligible for the credit.

Is the Lifetime Learning Credit refundable?

No, the Lifetime Learning Credit is not refundable. You can use the credit to pay any tax you owe, but you won't receive the money back as a refund, even if you earned no income or owe no tax.

American Opportunity Tax Credit vs. Lifetime Learning Credit

The American Tax Opportunity Credit is generally more valuable that the Lifetime Learning Credit, if you qualify. You can't claim both the American Opportunity Tax Credit and the Lifetime Learning Credit for the same student or the same qualified expenses.

Here are the key differences between these two education tax credits:

American Opportunity Tax Credit

Lifetime Learning Credit

Can be used for undergraduate expenses only.

Can be used for undergraduate, graduate, non-degree and vocational program expenses.

Student must be enrolled at least half time for at least one academic period beginning in the tax year.

Student must be enrolled in at least one course.

Lowers your taxable income by up to $2,500 per student per year.

Lowers your taxable income by up to $2,000 per year.

Up to 40% of credit is refundable.

Available for up to four tax years.

No limit on number of years.

Tuition, fees and course materials are qualified expenses.

Only tuition and fees are qualified expenses.

Education tax forms

In January your school will send you Form 1098-T, a tuition statement that shows the education expenses you paid for the year. You’ll use that form to enter the corresponding amounts on your tax return to claim an education tax credit or deduction.

If you also paid student loans , you may be able to deduct student loan interest from your taxable income. If you paid more than $600 in interest, your servicer will automatically send you Form 1098-E. You can still deduct interest if you paid less than $600, but you’ll have to ask your servicer for the form.

If your company provided funds for educational assistance — like tuition reimbursement or employer student loan repayment — up to $5,250 can be excluded from your taxable income.

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Ryan Lane is an assigning editor for NerdWallet whose work has been featured by The Associated Press, U.S. News & World Report and USA Today. See full bio.

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