The two credits at a glance
| American Opportunity | Lifetime Learning | |
|---|---|---|
| Maximum credit | $2,500 per student | $2,000 per return |
| How it’s figured | 100% of first $2,000 of expenses + 25% of next $2,000 | 20% of up to $10,000 of expenses |
| Refundable | 40%, up to $1,000 | No |
| Years available | First four years of college; four credits per student | Unlimited |
| Enrollment | At least half-time, in a degree or credential program | Any courses, including one class to improve job skills |
| Felony drug conviction | Not eligible | Eligible |
You can claim only one credit per student per year, but different students on the same return can use different credits.
Income limits
Both credits phase out as modified adjusted gross income rises from $80,000 to $90,000 (single or head of household) and from $160,000 to $180,000 (married filing jointly). Married couples filing separately can’t claim either credit. These limits aren’t indexed for inflation.
Social Security number requirement
Beginning with 2026 returns, the 2025 tax law requires the taxpayer (and spouse on a joint return) and the student to have a valid Social Security number to claim either credit. An ITIN is no longer enough.
Qualified expenses
- Tuition and required fees
- For the American Opportunity Credit, also required books, supplies, and equipment, even if not bought from the school
Room and board, insurance, transportation, and personal expenses don’t count for either credit, though room and board can be a qualified 529 expense. Expenses paid with tax-free scholarships, grants, or employer assistance don’t count either.
Who claims the credit
If you claim the student as a dependent, you claim the credit, even if the student paid the bills. If no one claims the student, the student can. Parents above the income limit sometimes come out ahead by not claiming a college student so the student can claim the American Opportunity Credit. The refundable portion isn’t available to most full-time students under 24 who have their own earned income below half their support.
Coordinating with 529 plans and scholarships
The same dollar can’t produce two tax benefits. A common approach is to pay the first $4,000 of tuition and books with cash or loans to claim the full American Opportunity Credit, and use 529 money for the rest, including room and board. In some cases it pays to treat part of a scholarship as taxable income so that tuition paid with it can generate the credit. The 2025 law also expanded 529 plans: the K–12 withdrawal limit rises to $20,000 a year in 2026, and more credential and continuing-education costs qualify.
What we need
- Form 1098-T from the school
- Records of what you actually paid and when (the 1098-T doesn’t always match)
- Receipts for required books and supplies
- Any 529 plan distributions (Form 1099-Q) and scholarship information
Questions about your situation?
Call us at 303-734-1040 or email 1040@taxshop.tax. We’re an independent Colorado tax practice in Lone Tree, serving clients since 1969.