- You must be an undergraduate student at the time you paid for educational expenses.
Lifetime Learning Credit (LLC)
If you do not qualify for the AOTC, you may qualify for the LLC; however, if you qualify for both, you can only choose one of these college tax credits. More people qualify for the LLC, so it may work better for your circumstances.
The AOTC is most often claimed by parents with dependent college students, while the LLC is more often claimed by independent students, especially those furthering their higher education with certifications, doctoral studies, or other post-baccalaureate forms of education.
- Undergraduate students past their fourth year of education
- Graduate students
- Professional students
- Postgraduate career training
Anyone attending postsecondary education of some kind can use the LLC to improve their taxes. You cannot claim as much as the AOTC, but you can still claim up to $2,000 per year, per eligible student. There is no minimum enrollment requirement, so you can be less than half time at a postsecondary school and still take this college tax credit.
With the AOTC, if the amount you owe is less than the credit amount, you can get the remainder as a tax refund and use it to pay down your student loans
The LLC is calculated as 20% of the first $10,000 you spend directly on your education, like tuition or books. Like the AOTC, you can only claim direct educational expenses. Room and board, transportation, and other expenses do not count.
- For a married couple filing together, modified adjusted gross income (MAGI) is $110,000 or less. It phases out at $130,000 or more.
- For a single tax filer (head of household, qualified widower, or independent single individual), the MAGI is $55,000. The tax credit is eliminated at $65,000 or more.
- If you are not claimed as someone else’s dependent on their taxes, you can claim the LLC yourself.
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Unlike the AOTC, you cannot get money back from the LLC if you don’t owe anything in taxes. Still, applying this college tax credit can benefit you in the long run.
Although you cannot claim both the AOTC and the LLC for one person, you may have sufficiently complex taxes that you can claim both college tax credits for different individuals. For example, if you have a dependent child in a four-year undergraduate degree program, you can claim the AOTC on your taxes for them. At the same time, if you are a returning student at a professional or graduate school, you can likely claim the LLC for yourself.
- You are married
The MAGI is used to determine whether you qualify for the AOTC or LLC. Many people do, so if you can estimate your MAGI and find that you fit into the brackets as discussed above, claim these credits to make repaying your student loans and managing your personal finances simpler.
When you claim a college tax credit like the AOTC or LLC, you reduce your tax burden dollar for dollar of the amount you qualify for. If you did not spend much money on your education, for example, but you can claim $800 toward your undergraduate education, you can use either the AOTC or LLC to lower how much you must pay in taxes by $800.
If you qualify for either of these tax credits, it is important to claim them. Thanks to the Protecting Americans Against Tax Hikes (PATH) Act of 2015, the AOTC is a permanent college tax credit. The LLC may be subject to change or elimination, but it is a good balance to the AOTC.