AOTC or Lifetime Learning: which education credit
Two credits, one student, one choice a year. How the American opportunity and lifetime learning credits differ, what counts, and whose return they belong on.
Quick answers
- Which education credit should I claim?
- Generally the American opportunity credit when the student is in the first four years of a degree and enrolled at least half-time, because it is larger and partly refundable. The lifetime learning credit covers graduate work and single courses.
- Can I claim both education credits for the same student?
- No. One student gets one credit in a given year. You can take the American opportunity credit for one child and the lifetime learning credit for another on the same return, but never both for the same person.
- Who claims the credit, the parent or the student?
- The parent, when the parent claims the student as a dependent, using the student's 1098-T to do it. If nobody claims the student, the credit goes on the student's own return, though a young full-time student usually gets it only as a reduction of tax. Settle it before either return is filed.
There are two education credits and you can use only one of them for a given student in a given year. Both are claimed on Form 8863, and choosing between them comes down to how far into a degree the student is and how many students you are paying for.
| American opportunity credit, maximum per student | $2,500 | 2025 Form 8863 Part III |
|---|---|---|
| Refundable share of the AOTC | 40% | 2025 Form 8863 line 8 |
| Lifetime learning credit, maximum per return | $2,000 | 2025 Form 8863 line 12 |
| Lifetime learning credit rate | 20% | 2025 Form 8863 line 12 |
| Expenses counted for the lifetime learning credit | $10,000 | 2025 Form 8863 line 11 |
The two credits side by side
The American opportunity credit is worth up to $2,500 per student per year. It is $2,000 of adjusted expenses at full value plus 25% of the next tier of expenses, and 40% of the result is refundable, meaning that share can come back to you after your tax reaches zero. It comes with conditions that all have to hold: the student is in the first four years of postsecondary education, has not already used the credit in four tax years, was enrolled at least half-time for at least one academic period during the year, is working toward a degree or other recognized credential, and has no felony drug conviction as of the end of the year.
The lifetime learning credit is 20% of up to $10,000 of adjusted expenses, so at most $2,000. None of it is refundable. In exchange it drops nearly every condition: there is no year limit, no half-time requirement, no degree requirement, graduate work qualifies, and a single course taken to improve job skills is enough.
The size difference matters less than the shape. The American opportunity credit is per student, so two undergraduates can produce two of them. The lifetime learning credit is per return, so a second student adds nothing once the expense cap is reached.
The income limits
Both credits phase out over the same range: they start to shrink at $80,000 of modified adjusted gross income and are gone at $90,000 for single and head of household filers, and run from $160,000 to $180,000 on a joint return.
Neither credit is available on a married filing separately return, and neither is available to someone who is claimed as a dependent on another person's return. The student also needs a taxpayer identification number issued by the due date of the return.
What counts as a qualified expense
Tuition and fees required for enrollment count for both credits. Books, supplies and equipment count for the American opportunity credit whether or not they are bought from the school, which is the one place that credit reaches further than the other; for the lifetime learning credit they count only if they have to be paid to the school as a condition of enrollment.
Room and board, transportation, insurance, medical fees and personal living expenses never count.
The course itself has to qualify too, and the two credits ask different things of it. The American opportunity credit requires that the student be working toward a degree or other recognized credential, so a single course taken outside a program does not support it. The lifetime learning credit also covers a course taken to acquire or improve job skills, which is the one route by which a standalone class qualifies.
Why the 1098-T is not the answer
Box 1 of the 1098-T is what the school received during the calendar year for qualified tuition and related expenses. The credit is figured on what was actually paid, reduced by scholarships, grants and other tax-free assistance that covered the same costs.
Scholarships work against you here, and that is the most common surprise. A large box 5 can leave very little to claim even when box 1 looks substantial. In some cases a student can choose to include part of a scholarship in their own income, freeing expenses for the parents' credit; it is a calculation worth doing rather than assuming, and it only helps in a narrow set of circumstances.
One credit per student, and whose return
You can take the American opportunity credit for one child and the lifetime learning credit for another on the same return. What you cannot do is claim both for the same student in the same year, or claim a credit for expenses someone else already used.
If a parent claims the student as a dependent, the parent claims the credit and uses the student's 1098-T to do it, even though the form carries the student's name. The student cannot then claim anything for the same expenses. If nobody claims the student as a dependent, the credit goes on the student's own return. One limit follows the student there: a full-time student under 24 who does not provide more than half of their own support out of earned income, who has at least one living parent, and who is not filing a joint return, generally cannot take the refundable part of the American opportunity credit. The credit is still available, just entirely as a reduction of tax.
Settle that question before either return is filed. Two returns claiming the same student's expenses means a rejected e-file and an amendment.