What You Need to Know about AOTC and LLC

The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) can reduce a taxpayer's income tax liability dollar-for-dollar for qualified education expenses paid. These credits can help offset the cost of higher education.

Here's what colleges, universities, trade and technical schools, educational organizations, student organizations, and high schools need to know:

IRS has products to help you inform students and parents about the availability of tax benefits for education:

Here's what preparers of the Forms 1098-T need to know:

It's important to provide accurate and timely Forms 1098-T, Tuition Statement, to help students offset the cost of higher education and avoid costly errors with the IRS. See the Instructions for Forms 1098-E and 1098-T for more information.

Here's what tax return preparers need to know:

 

  • Review Form 1098-T -- Did the student attend at least half time for a full academic period? Is the 'graduate student' box checked? For what academic period are the amounts reported? Remember the amount in Box 1 on Form 1098-T may differ from the amount your client can use to compute a credit on this year's tax return.

 

 

  • Complete and file Form 8863 -- Part I is for refundable AOTC, Part II is for non-refundable AOTC or LLC, and in Part III your client must enter information for each student.

 

  • Remember no double benefits are allowed -- Your client can claim only one tax benefit for a student and for particular tax year. Ask where the education funds came from, such as a tax-free scholarship or grant, the Department of Veteran's Affairs, tax-free portion of a Coverdell education savings account or a qualified tuition program.

 

 

Resources - Tax Credits for Education 

Related Forms and Publications

 

Return to Other Refundable Credits Toolkit