Education Tax Credits

Community college students are eligible to receive education tax credits that can reduce the expense of their education. There are three education tax credits available, the American Recovery and Reinvestment Act, Hope Credit and the Lifetime Learning Credit. The credits are based on education expenses paid for them, their spouse, or their dependents.

American Opportunity Credit

The American Opportunity Tax Credit modifies the existing Hope Credit for tax years 2009 and 2010 under ARRA. The credit was extended to apply for tax years 2011 and 2012 by the Tax Relief and Job Creation Act of 2010. The new credit makes the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

Click here for information about the American Opportunity Credit.

The Hope Tax Credit

The Hope Credit is a federal tax credit. The actual amount of the credit depends upon family income and the amount of qualified tuition paid less any financial aid.

To qualify, the taxpayer must file a return, owe taxes, and claim the student as a dependent (unless the student is a spouse). The student must be enrolled at least half-time in an eligible program leading to a degree, certificate or diploma and must not have completed the first two years of undergraduate study. The credit is not available to students who have been convicted of a felony drug offense.

The Lifetime Learning Tax Credit

The Lifetime Learning Tax Credit may be claimed for the taxpayer, spouse, or eligible dependents for an unlimited number of years. This credit is family-based rather than dependent-based like the Hope Credit. The actual amount of the credit depends upon the family’s income and the amount of qualified tuition less any financial aid. Unlike the Hope Credit, students are not required to be enrolled at least half-time in one of the first two years of post-secondary education.

This is provided for informational purposes only. For detailed tax information, please consult a tax advisor. Information is also available at