How to avoid education credit errors

Before claiming an education credit, be sure to review the eligibility rules and use the Interactive Tax Assistant to see whether you qualify. Follow these tips to avoid common errors on the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC).

Tips to avoid common errors

Don’t claim a credit for a student who did not attend a college, university or vocational school

• AOTC is for post-secondary education which includes colleges, universities, and vocational schools that are eligible to participate in a student aid program run by the Department of Education. However, not all eligible schools participate in the financial aid program. If the school is not listed, contact the school directly.
• To qualify for AOTC, the eligible student must have attended at least half time for an academic period. The school determines full time status and the length of an academic period. To qualify for LLC, the eligible student must be enrolled in one or more courses for an academic period.
• If an education credit is claimed and the student does not have a Form 1098-T, Tuition Statement, they should keep supporting documents to substantiate their claim.
• Note: Return preparers should ask questions to determine how long the student attended, number of courses and what the school considers full time. Ask enough questions until you feel comfortable the student qualifies and let your clients know that if the IRS audits them, they need to have documents supporting their claim.

Don’t claim a credit for eligible education expenses not paid or not considered as paid

• See Education credits: American Opportunity Tax Credit (AOTC)and Lifetime Learning Credit (LLC) for information on who is a qualifying student.
• Refer to Qualified education expenses to understand when the expenses must be paid and who must pay them, and how to avoid a double benefit.

Don’t claim a credit for unqualified expenses

• See Qualified education expenses for more information on what qualifies and what does not qualify as expenses for education benefits.

Don’t claim the AOTC for an eligible student for more than 4 years

• AOTC is only available for four years for each eligible student. This includes any year the credit was claimed for the same student.
• Complete Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits) and answer all the yes-or-no questions.

Resources

Education credits

• Interactive Tax Assistant
• Qualified education expenses
• Eligible educational institution
• Education credits: AOTC and LLC
• Tax benefits for education: Information center

Useful forms and publications

• Publication 970, Tax Benefits for Education
• Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)
  • Instructions for Form 8863
• Form 1098-T, Tuition Statement
  • Instructions for Forms 1098-E and T

Education credit marketing materials

• Publication 4772, American Opportunity Tax Credit PDF
• Publication 5081, Education Credits Online Resource Guide PDF
• Publication 5198, Are you or a family member attending college or taking courses to acquire or improve job skills? PDF

Tax tips

• Tax tip 2022-38, Two tax credits that can help cover the cost of higher education
• Tax tip 2022-123, College students should study up on these two tax credits

Tax preparation assistance

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