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American Opportunity Tax Credit and Other Education Tax Credits for 2023
Claim the American Opportunity Tax Credit or Lifetime Learning Credit if you had eligible higher education expenses in 2023.
Ryan Lane Assigning Editor | Small business, student loans
Ryan Lane is an editor on NerdWallet’s small-business team. He joined NerdWallet in 2019 as a student loans writer, serving as an authority on that topic after spending more than a decade at student loan guarantor American Student Assistance. In that role, Ryan co-authored the Student Loan Ranger blog in partnership with U.S. News & World Report, as well as wrote and edited content about education financing and financial literacy for multiple online properties, e-courses and more. Ryan also previously oversaw the production of life science journals as a managing editor for publisher Cell Press. Ryan is located in Rochester, New York.
Chris Hutchison helped build NerdWallet's content operation and has worked across banking, investing and taxes. He now leads a team exploring new markets. Before joining NerdWallet, he was an editor and programmer at ESPN and a copy editor at the San Jose Mercury News.
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The American Opportunity Tax Credit and the Lifetime Learning Credit are federal tax credits that can lower your upcoming tax bill if you paid for college in 2023.
You can claim these education tax credits as a student if you're not claimed as a dependent on anyone else's tax return. Parents can claim the credit for a student who is a dependent. Spouses can claim the credit if they use the married filing jointly status.
Here's what you need to know about the American Opportunity Tax Credit, Lifetime Learning Credit and education tax forms.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.99-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. As certified by your school and less any other financial aid you might receive. Minimum $1,000. Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 7/10/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
Variable APR
5.59-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. As certified by your school and less any other financial aid you might receive. Minimum $1,000. Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 7/10/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
4.15-15.49%
Lowest rates shown include the auto debit. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 7/12/2024. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Variable APR
5.37-15.70%
Lowest rates shown include the auto debit. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 7/12/2024. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Credible lets you check with multiple student loan lenders to get rates with no impact to your credit score. Visit their website to take the next steps.
What is the American Opportunity Tax Credit?
The American Opportunity Tax Credit is a federal tax credit that allows you to lower your tax bill by up to $2,500 if you paid that much in undergraduate education expenses last year.
How the American Opportunity Tax Credit works
The American Opportunity Tax Credit lets you claim all of the first $2,000 you spend on eligible education expenses, plus 25% of the next $2,000, for a total of $2,500. Qualified expenses include:
Tuition.
Mandatory school fees.
Books and supplies.
You may not claim living expenses or transportation costs.
Who can claim the American Opportunity Tax Credit?
The American Opportunity Tax Credit is for undergraduate college students only. To qualify, students must meet the following criteria, according to the IRS:
Be pursuing a degree or other recognized education credential.
Be enrolled at least half time for at least one academic period beginning in the tax year.
Not have finished the first four years of higher education at the beginning of the tax year.
Not have claimed the American Opportunity Tax Credit for more than four tax years.
Not have a felony drug conviction at the end of the tax year.
As a student, you can claim the credit on your taxes for a maximum of four years as long as no one else, like your parents, claims you as a dependent on their tax returns. Parents will claim the credit, instead of the student, if they paid for the student's education expenses and have the student listed as a dependent on their return.
Your 2023 modified adjusted gross income, or MAGI, determines how much of the American Opportunity Tax Credit you can claim:
MAGI (single filer)
MAGI (married filing jointly)
American Opportunity Tax Credit eligibility
$80,000 or less.
$160,000 or less.
Full credit.
More than $80,000, but less than $90,000.
More than $160,000, but less than $180,000.
Partial credit.
$90,000 or more.
More than $180,000.
Ineligible for the credit.
What the American Opportunity Credit is worth
The American Opportunity Tax Credit lowers the amount of taxes you pay. For example, if you owe $3,000 in taxes and get the full $2,500 credit, you’ll only have to pay $500 to the IRS.
Is the American Opportunity Tax Credit refundable?
Yes, it's refundable. You can still receive 40% of the American Opportunity Tax Credit's value — up to $1,000 — even if you earned no income last year or owe no tax. For example, if you qualified for a refund, this credit could increase the amount you'd receive by up to $1,000. That's why the American Opportunity Tax Credit is typically the best education tax break for students and their families.
The Lifetime Learning Credit is a a federal tax credit that can reduce your taxable income by up to $2,000 if you're pursuing an undergraduate, graduate, vocational or non-degree program. Unlike the American Opportunity Tax Credit, there's no limit to the number of tax years in which you can claim this credit.
How the Lifetime Learning Credit works
You can claim 20% of the first $10,000 you paid toward 2023 tuition and fees, for a maximum of $2,000 each year.
Course supplies, living expenses and transportation costs are not qualified expenses for the Lifetime Learning Credit.
Who can claim the Lifetime Learning Credit?
The Lifetime Learning Credit is ideal for graduate students or anyone taking classes to develop new skills, even if you already claimed the American Opportunity Tax Credit on your taxes in the past.
Students can claim the Lifetime Learning Credit for themselves if they file their own taxes. Parents of dependent students can also claim the credit.
To qualify for the Lifetime Learning Credit, you must meet the following criteria, according to the IRS:
Be enrolled or taking courses at an eligible educational institution.
Be taking higher education courses to get a degree or other recognized education credential or to get or improve job skills.
Be enrolled for at least one academic period beginning in the tax year.
Your 2023 modified adjusted gross income, or MAGI, determines how much of the Lifetime Learning Credit you can claim:
MAGI (single filer)
MAGI (married filing jointly)
Lifetime Learning Credit eligibility
$80,000 or less.
$160,000 or less.
Full credit.
More than $80,000, but less than $90,000.
More than $160,000, but less than $180,000.
Partial credit.
$90,000 or more.
More than $180,000.
Ineligible for the credit.
Is the Lifetime Learning Credit refundable?
No, the Lifetime Learning Credit is not refundable. You can use the credit to pay any tax you owe, but you won't receive the money back as a refund, even if you earned no income or owe no tax.
American Opportunity Tax Credit vs. Lifetime Learning Credit
The American Tax Opportunity Credit is generally more valuable that the Lifetime Learning Credit, if you qualify. You can't claim both the American Opportunity Tax Credit and the Lifetime Learning Credit for the same student or the same qualified expenses.
Here are the key differences between these two education tax credits:
American Opportunity Tax Credit
Lifetime Learning Credit
Can be used for undergraduate expenses only.
Can be used for undergraduate, graduate, non-degree and vocational program expenses.
Student must be enrolled at least half time for at least one academic period beginning in the tax year.
Student must be enrolled in at least one course.
Lowers your taxable income by up to $2,500 per student per year.
Lowers your taxable income by up to $2,000 per year.
Up to 40% of credit is refundable.
Not refundable.
Available for up to four tax years.
No limit on number of years.
Tuition, fees and course materials are qualified expenses.
Only tuition and fees are qualified expenses.
Education tax forms
In January your school will send you Form 1098-T, a tuition statement that shows the education expenses you paid for the year. You’ll use that form to enter the corresponding amounts on your tax return to claim an education tax credit or deduction.
If you also paid student loans, you may be able to deduct student loan interest from your taxable income. If you paid more than $600 in interest, your servicer will automatically send you Form 1098-E. You can still deduct interest if you paid less than $600, but you’ll have to ask your servicer for the form.
If your company provided funds for educational assistance — like tuition reimbursement or employer student loan repayment — up to $5,250 can be excluded from your taxable income.