Who Can Claim Education Tax Credit on Their Taxes?

Education tax credits provide taxpayers a significant opportunity to reduce their tax burden while investing in higher education. These credits can lower tuition and related expenses, making them an important consideration during tax season. Knowing the qualifications for these credits is essential for maximizing savings.

Dependent Requirements

To claim an education tax credit, the student must be listed as a dependent on the taxpayer’s return. A dependent can be a qualifying child or relative. A child qualifies if they are under 24 at the end of the tax year, are a full-time student, lived with the taxpayer for more than half the year, and did not provide more than half of their own financial support.

In cases of divorced or separated parents, the custodial parent—who the child lived with for most of the year—usually claims the child as a dependent. The non-custodial parent can claim the child only if the custodial parent signs IRS Form 8332 to release the exemption claim, attaching it to their tax return.

Enrollment Criteria

To qualify for education tax credits, the student must be enrolled at least half-time for one academic period during the tax year at an eligible educational institution. The institution’s standards define half-time enrollment, so taxpayers should confirm this with the school.

The American Opportunity Tax Credit (AOTC) applies to students in their first four years of post-secondary education and requires pursuit of a degree or recognized credential. The Lifetime Learning Credit (LLC) is more flexible, as it does not require degree pursuit and can be claimed for any number of years, making it ideal for career advancement or skill enhancement.

Income Thresholds

Income thresholds determine eligibility for education tax credits. For the 2024 tax year, the AOTC phases out for single filers with a modified adjusted gross income (MAGI) over $80,000 and is unavailable for those earning more than $90,000. For married couples filing jointly, the phase-out range is $160,000 to $180,000.

The LLC has different thresholds. For 2024, it phases out for single filers with a MAGI over $59,000 and is unavailable for those exceeding $69,000. Joint filers experience a phase-out between $118,000 and $138,000. Taxpayers who do not qualify for the AOTC due to income restrictions may still benefit from the LLC if their expenses align with its criteria.

Filing Status Factors

Filing status affects eligibility for education tax credits, impacting benefit amounts and phase-out limits. Single filers and married couples filing jointly face different thresholds, as joint filers must consider their combined income. Married couples should carefully assess their filing status to optimize tax outcomes.

Filing separately may be advantageous if one spouse has significant educational expenses and the other has a high income. However, married individuals filing separately are generally ineligible for the AOTC, requiring careful financial analysis before making a decision.

Eligible Institutions

The educational institution must meet IRS eligibility requirements to claim education tax credits. It must be an accredited post-secondary school participating in a federal student aid program under Title IV of the Higher Education Act. This includes colleges, universities, vocational schools, and some foreign institutions meeting accreditation and federal aid criteria. Taxpayers can verify eligibility through the Federal Student Aid website.

Non-accredited programs, even if offering valuable training or certifications, are ineligible for education tax credits. Recreational or personal enrichment courses without a formal credential or degree pathway are also excluded. Taxpayers pursuing non-traditional education should confirm the institution’s status to determine eligibility for credits like the AOTC or LLC.