Education Funding
beginner · $0 - $50K
For the first 4 years of college, get a credit of 100% of first $2,000 + 25% of next $2,000 in qualified expenses = $2,500 max. 40% ($1,000) is refundable.
Covers tuition, fees, books, supplies.
Annual Limit
$2,500 per eligible student per year
Key takeaways
- Worth up to $2,500 per student for each of the first 4 years of college; 40% ($1,000) is refundable.
- Covers tuition, fees, and required books and supplies, but not room and board.
- Requires at least half-time enrollment in a degree program; phases out $80K-$90K single / $160K-$180K married.
- You can use 529 funds and the AOTC in the same year, just not for the same expenses.
AOTC vs. Lifetime Learning Credit
| AOTC | Lifetime Learning | |
|---|---|---|
| Maximum | $2,500 per student | $2,000 per return |
| Refundable | Up to $1,000 | No |
| Year limit | First 4 years | No limit |
| Enrollment | At least half-time | Any, even one course |
You cannot claim both for the same student in the same year. General mechanics, not a recommendation.
Requirements
- Enrolled at least half-time in degree program
- First 4 years of post-secondary education
- AGI under $90K single / $180K married
- No felony drug conviction
How to Implement
- 1Receive Form 1098-T from college
- 2Track qualified education expenses
- 3File Form 8863 with tax return
- 4Claim credit (one per student, max 4 years)
The bottom line
The AOTC is the larger, partly refundable education credit, but it is limited to the first four years of a degree. The Lifetime Learning Credit is smaller yet far more flexible.
Frequently Asked Questions
Related education funding strategies
Sources
- Internal Revenue Service, Rev. Proc. 2025-32
2026 inflation-adjusted amounts (tax brackets, standard deduction, estate & gift, FSA, credits)
- Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
- Internal Revenue Service, Rev. Proc. 2025-19
2026 HSA and HDHP inflation-adjusted limits
Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.