Understanding College Tax Credits: What Students Need to Know


College can be really expensive. Between tuition, books, and living expenses, the costs can add up quickly. Luckily, there are a few ways you can reduce your tax burden when it comes to paying for college. One of the most popular is taking advantage of tax credits specifically available to college students.

But before you get too excited about the prospect of slashing your taxes with a college tax credit, you should understand what these credits are and what rules you must follow in order to qualify. In this article, we’ll explain how college tax credits work, who is eligible for them, and what you need to do to take advantage of them. We’ll cover everything from the American Opportunity Credit to the Lifetime Learning Credit—so let’s get started!

Overview of College Tax Credits

Tax credits can be an icy subject for many, but college students in particular should take note. The good news is, there are certain credits that you can use to reduce the amount of taxes you owe—and possibly even help cover some of the costs associated with your education.

College-specific tax credits are a great way to mitigate the cost of higher learning. To put it simply, they’re credits that any student or their parent can claim on their tax returns—reducing their overall tax burden and helping defray expenses related to educational costs.

So what kind of credits are available? Generally speaking, there are two types: The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).

The AOTC is worth up to $2,500 per year for any tuition expenses you incur during your first four years in college, while the LLC offers up to $2,000 per year for any educational expenses incurred at an accredited institution. Essentially, these credits can help offset some of the cost of textbooks and course materials, living expenses and other fees associated with your college experience.

Types of Available College Tax Credits

If you’re a college student or the parent of a student, you may be eligible to receive a tax credit to help offset the cost of college tuition. There are various types of college tax credits available depending on your individual circumstances, and understanding how they work can save you money and time when you’re filing your taxes.

Here’s an overview of the two main types of credits available:

  • The American Opportunity Tax Credit (AOTC): This is a credit for qualified education expenses incurred for an eligible student and helps cover tuition, required fees and course materials. It can provide up to $2,500 per eligible student for a maximum of four years.
  • The Lifetime Learning Tax Credit (LLTC): LLTC applies to courses that improve job skills and can be used for undergraduate, graduate and professional degree courses. It offers up 20% on the first $10,000 spent on tuition, fees and course materials each year and allows students to claim up to $2,000 in credits.

Estimating the Possible Tax Credit You Can Receive

You’re probably wondering how much of a tax credit you can receive as a college student. Good news—there are two programs available for you to estimate the possible tax credit you can receive.

First, there’s the American Opportunity Tax Credit (AOTC). This is a tax credit of up to $2,500 per eligible student for the first four years of college or vocational school. It’s partially refundable, meaning that you can get up to 40% of it back in cash even if you don’t owe any taxes. There are some eligibility requirements, such as not having any drug-related convictions and being enrolled in an eligible degree program at least half time.

The other program is the Lifetime Learning Tax Credit (LLTC). This one is for undergraduate and graduate students who have already completed at least one year of college (or are enrolled in graduate school) and covers all subsequent years of schooling—not just the first four years. The LLTC provides a tax credit of up to $2,000 per family annually. In this case, the credit is nonrefundable; it’s used only against taxes owed to the federal government.

By quickly estimating your possible tax credits for tuition and fees with either of these programs, you can plan ahead and decide how much money you need to cover educational costs.

Common Qualifications for College Tax Credits

There are some common qualifications for college tax credits that you’ll need to know in order to get the most out of these tax breaks. Here’s what you should look at when determining if you qualify:

Who Qualifies?

Generally, college tax credits are only available to taxpayers who are currently enrolled in college, and may be limited to those with modified adjusted gross income (MAGI) below certain levels. Depending on the credit, students may need to be enrolled full-time or part-time, and other restrictions may apply. Be sure to check the rules of the specific credit in order to make sure you qualify.

What Qualifies?

When it comes to qualifying expenses, post-secondary tuition and fees, books and supplies typically count as eligible expenses for many of the credits. However, some credits also consider room and board or childcare costs associated with attending school as reimbursable expenses. Again, be sure to review the specifics of each credit before filing your taxes.

Where Qualifies?

When it comes to location eligibility requirements, many tax credits are limited only by school accreditation requirements – meaning that a student can qualify for a given credit even if they’re not attending school in their home state. That said, it’s still important to make sure the program is approved under federal regulations before filing for a credit based on it.

If you meet the qualifications for a given college tax credit and have incurred certain eligible expenses related to your studies, then chances are good that you can get some much-needed money back come tax time!

When to Apply for the Tax Credit

When it comes to applying for the tax credit, you’ll typically need to do so when you file your tax return. This means that you’ll need to wait until April of the year following your college year to apply. For example, if you are attending school in 2019/2020, you won’t be able to apply for the credit until late April 2021.

You will also want to make sure that you are eligible for the tax credit before submitting your application. Factors like whether or not you are a dependent, how much money your parents make and more can all impact whether or not you are eligible for the credit.

It’s important to remember that some taxes credits have an expiration date. For example, many tax credits don’t allow students to receive them more than five years within their educational lifetime. Therefore, it’s important to understand the specifics of each type of tax credit and make sure that you’re applying at the right time so that you don’t miss out on any available benefits!

Tips for Maximizing Your College Tax Credit

Another great thing to know about tax credits is how to maximize them. Here are a few great tips to keep in mind:

Read the Small Print

Make sure you understand any and all terms for the eligibility of the college tax credit you’re considering. Some credits have extremely specific criteria, so it’s important to make sure you read the specifics and that you qualify for any credit you plan on taking.

File Your Taxes Early

Take advantage of filing your taxes early in the year if possible. You’ll increase your chances of getting the credit before anyone else does if funds start running low.

Stay Informed

Keep abreast of any changes in tax law or college credits announced during the school year or summer before fall enrollment. Those changes could influence what kind of tax credit might be available when it comes time to file.

For instance, if a new credit is created around educational expenses like books, supplies, and computers, make sure you take advantage of those opportunities when they become available!


In short, understanding how to manage your taxes before and during college can help reduce the amount of tax owed. College tax credits can be a great way to save money, and with the American Opportunity Tax Credit, you may even be eligible for a partial refund.

That said, tax credits are just one piece of the puzzle. Make sure to take a holistic approach to managing your higher education finances. Talk to a financial aid advisor to find out all your options and understand the implications on your taxes. Doing so can make all the difference when it comes to managing your finances and getting the most out of your college experience.

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