7 Education Credits
Question for this chapter. If you paid tuition for a child or for your own graduate studies, which education credit might apply on your return, and does a higher income reduce it?
Answer. Two credits are worth looking at: the American Opportunity Tax Credit, which is figured separately for each student and has a partly refundable portion, and the Lifetime Learning Credit, which is figured once per return and cannot be paid out beyond your tax. Both shrink as modified adjusted gross income moves through a range tied to your filing status, and both end at the top of that range. What either credit is worth depends on the tuition paid, any scholarships, your income and your filing status.
What to check
- How many students in the household are paying tuition, since one credit counts per student and the other per return
- Whether the student meets the requirements for the more generous credit before comparing the two
- Where your modified adjusted gross income falls relative to the reduction range for your filing status
- Whether a scholarship covered part of the tuition, which can change the amount available for the calculation
- Whether the tuition statement from the school matches your actual payment records
What to confirm. Confirm who claims the student, your filing status, and the qualified expenses you actually paid, using the school's tuition statement and the instructions for Form 8863.
One-line summary. Education credits depend on how many students you have, how much tuition you paid and where your income sits in the reduction range, so compare both credits before choosing.
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