How do I claim education-related tax credits or deductions?

Steps to Claim Education Tax Credits or Deductions

Determine Eligibility

1. Verify that you, your dependent, or a third party pays qualified education expenses for higher education.

2. Confirm that the student is enrolled at an eligible educational institution.

3. Ensure the student is yourself, your spouse, or a dependent listed on your tax return.

Choose the Appropriate Credit

- American Opportunity Tax Credit (AOTC)

 - For the first four years of higher education.

 - Up to $2,500 credit per eligible student.

 - 40% of the credit may be refundable.

- Lifetime Learning Credit (LLC)

 - For undergraduate, graduate, and professional degree courses.

 - Up to $2,000 credit per tax return.

 - Credit is non-refundable.

Gather Required Documents

- Form 1098-T, Tuition Statement, from the educational institution.

- Receipts for qualified education expenses not reported on Form 1098-T.

- Employer Identification Number (EIN) of the school if claiming AOTC.

Complete Form 8863

- Use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), to calculate and claim the credit.

- Include the school’s EIN if claiming AOTC.

- Attach Form 8863 to your Form 1040 or Form 1040-SR when filing your tax return.

File Your Tax Return

- Ensure that you, your spouse (if filing jointly), and the qualifying student have a valid Taxpayer Identification Number (TIN) by the due date of the return (including extensions).

- File your tax return with the attached Form 8863.

Keep Records

- Retain copies of all documents used to determine eligibility and calculate the credit.

- Keep records in case of an IRS audit to substantiate the claim.

Additional Considerations

- You cannot claim both AOTC and LLC for the same student in the same tax year.

- You cannot claim the credit if your filing status is married filing separately.

- The credit may be phased out or disallowed based on your Modified Adjusted Gross Income (MAGI).

Use IRS Tools and Resources

- Utilize the IRS's "Am I Eligible to Claim an Education Credit?" interactive app to determine eligibility.

- Refer to [Publication 970, Tax Benefits for Education], for detailed information on qualified education expenses and how to claim education credits.

Addressing IRS Notices or Audits

- If audited by the IRS or if additional information is requested, review your Form 1098-T for accuracy.

- Provide additional documentation such as receipts or cancelled checks if expenses are not reported on Form 1098-T.

Correcting Errors or Omissions

- If you need to amend your tax return to claim the credit or correct errors, file Form 1040-X, Amended U.S. Individual Income Tax Return.

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Sources:

Education Credits AOTC LLC | Internal Revenue Service 2024-08-03

Education credits: questions and answers | Internal Revenue Service 2024-08-03

AOTC | Internal Revenue Service 2024-08-03

Am I eligible to claim an education credit? | Internal Revenue Service 2024-08-02

Credits and deductions for individuals | Internal Revenue Service 2024-08-03

LLC | Internal Revenue Service 2024-08-03

Earned Income Tax Credit (EITC) | Internal Revenue Service 2024-08-03

Publication 970 (2023), Tax Benefits for Education | Internal Revenue Service 2024-08-03

Tax benefits for education: Information center | Internal Revenue Service 2024-08-02

Qualified Ed Expenses | Internal Revenue Service 2024-08-02