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IRS.gov Website
Publication 17
taxmap/pub17/p17-179.htm#en_us_publink1000174558

Chapter 35
Education Credits(p225)


What’s New(p225)

rule
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Form 1098-T requirement.(p225)
For tax years beginning after June 29, 2015, generally tax year 2016 returns for most taxpayers, the law requires a taxpayer (or a dependent) to have received a Form 1098-T from an eligible educational institution in order to claim the tuition and fees deduction, American opportunity credit, or the lifetime learning credit.
However, for tax year 2016, a taxpayer may claim one of these education benefits if the student does not receive a Form 1098-T because the student’s educational institution is not required to send a Form 1098-T to the student under existing rules (for example, if the student is a nonresident alien, has qualified education expenses paid entirely with scholarships, or has qualified education expenses paid under a formal billing arrangement). If a student’s educational institution is not required to provide a Form 1098-T to the student, a taxpayer may claim one of these education benefits without a Form 1098-T if the taxpayer otherwise qualifies, can demonstrate that the taxpayer (or a dependent) was enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and related expenses.
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American opportunity credit.(p225)
The American opportunity credit was made permanent for tax years beginning after December 18, 2015.
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Ban on claiming the American opportunity credit.(p225)
If you claim the American opportunity credit even though you're not eligible, you may be banned from claiming the credit for up to 10 years. See the Caution statement under Introduction, later.
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Taxpayer identification number needed by due date of return.(p225)
If you don’t have a taxpayer identification number (TIN) by the due date of your 2016 return (including extensions), you can’t claim the American opportunity credit on either your original or an amended 2016 return, even if you later get a TIN. Also, the American opportunity credit isn’t allowed on either your original or an amended 2016 return for a student who doesn’t have a TIN by the due date of your return (including extensions), even if that student later gets a TIN.
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Limits on modified adjusted gross income (MAGI).(p225)
The lifetime learning credit MAGI limit increases to $131,000 if you are filing married filing jointly ($65,000 if you are filing single, head of household, or qualifying widow(er)). The American opportunity credit MAGI limits remain unchanged. See Table 35-1.
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For 2016, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are: This chapter will present an overview of these education credits. To get the detailed information you will need to claim either of the credits, and for examples illustrating that information, see chapters 2 and 3 of Pub. 970.
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Can you claim more than one education credit this year? (p226)

rule
For each student, you can elect for any year only one of the credits. For example, if you choose to claim the American opportunity credit for a child on your 2016 tax return, you can’t, for that same child, also claim the lifetime learning credit for 2016.
If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both.
If you pay qualified education expenses for more than one student in the same year, you can choose to claim the American opportunity and the lifetime learning credits on a per-student, per-year basis. This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year.
Deposit
The American opportunity credit will always be greater than or equal to the lifetime learning credit for any student who is eligible for both credits. However, if any of the conditions for the American opportunity credit, listed in Table 35-1, aren’t met for any student, you can’t take the American opportunity credit for that student. You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. See chapter 19 and chapter 27 of this publication, and also Pub. 970, for information on other education benefits.
EIC
If you claim the American opportunity credit even though you're not eligible and it's determined that your error is due to reckless or intentional disregard of the rules, but not fraud, you won't be allowed to claim the credit for 2 years. If it's determined that your error is due to fraud, you won't be allowed to claim the credit for 10 years.
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Table 35-1. Comparison of Education Credits for 2016

Caution. You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student.

 American Opportunity Credit Lifetime Learning Credit
Maximum creditUp to $2,500 credit per eligible studentUp to $2,000 credit per return
Limit on modified adjusted gross income (MAGI)$180,000 if married filing jointly;
$90,000 if single, head of household, or qualifying widow(er)
$131,000 if married filing jointly;
$65,000 if single, head of household, or qualifying widow(er)
Refundable or nonrefundable40% of credit may be refundableNonrefundable—credit limited to the amount of tax you must pay on your taxable income
Number of years of postsecondary educationAvailable ONLY if the student had not completed the first 4 years of postsecondary education before 2016 Available for all years of postsecondary education and for courses to acquire or improve job skills
Number of tax years credit availableAvailable ONLY for 4 tax years per eligible student (including any year(s) the Hope scholarship credit was claimed) Available for an unlimited number of tax years
Type of program requiredStudent must be pursuing a program leading to a degree or other recognized education credential Student does not need to be pursuing a program leading to a degree or other recognized education credential
Number of coursesStudent must be enrolled at least half-time for at least one academic period beginning during 2016 (or the first 3 months of 2017 if the qualified expenses were paid in 2016) Available for one or more courses
Felony drug convictionAt the end of 2016, the student had not been convicted of a felony for possessing or distributing a controlled substanceFelony drug convictions do not make the student ineligible
Qualified expensesTuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Tuition and required enrollment fees (including amounts required to be paid to the institution for course-related books, supplies, and equipment)
Payments for academic periodsPayments made in 2016 for academic periods beginning in 2016 or beginning in the first 3 months of 2017
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Differences between the American opportunity and lifetime learning credits.(p226)

rule
There are several differences between these two credits. These differences are summarized in Table 35-1.

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Useful items

You may want to see:


Publication
 970 Tax Benefits for Education
Form (and Instructions)
 8863 : Education Credits (American Opportunity and Lifetime Learning Credits)
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Who Can Claim an Education Credit(p226)

rule
You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. For 2016, the credits are based on the amount of qualified education expenses paid for the student in 2016 for academic periods beginning in 2016 and in the first 3 months of 2017.
For example, if you paid $1,500 in December 2016 for qualified tuition for the spring 2017 semester beginning in January 2017, you may be able to use that $1,500 in figuring your 2016 education credit(s).
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Academic period.(p226)

rule
An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. If an educational institution uses credit hours or clock hours and doesn’t have academic terms, each payment period can be treated as an academic period.
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Eligible educational institution.(p227)

rule
An eligible educational institution is generally any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. Virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions meet this definition. The educational institution should be able to tell you if it is an eligible educational institution.
Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid (FSA) programs.
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Who can claim a dependent's expenses.(p227)

rule
If an exemption is allowed for any person who claims the student as a dependent, all qualified education expenses of the student are treated as having been paid by that person. Therefore, only that person can claim an education credit for the student. If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit.
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Expenses paid by a third party.(p227)

rule
Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Therefore, you are treated as having paid expenses that were paid by the third party. For more information and an example, see Who Can Claim a Dependent's Expenses in Pub. 970, chapter 2 or 3.
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Who cannot claim a credit.(p227)

rule
You can’t claim an education credit if any of the following apply.
  1. Your filing status is married filing separately.
  2. You are claimed as a dependent on another person's tax return, such as your parent's return.
  3. You (or your spouse) were a nonresident alien for any part of 2016 and the nonresident alien did not elect to be treated as a resident alien for tax purposes.
  4. You didn't have an SSN (or ITIN) by the due date of your 2016 return (including extensions), you can't claim the American opportunity credit on either your original or an amended 2016 return, even if you later get an SSN (or ITIN). Also, you can't claim this credit on your original or an amended 2016 return for a student who didn't have an SSN, ATIN, or ITIN by the due date of your return (including extensions), even if the student later gets one of those numbers.
  5. Your MAGI is one of the following.
    1. American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er).
    2. Lifetime learning credit: $131,000 or more if married filing jointly, or $65,000 or more if single, head of household, or qualifying widow(er).
Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. However, if you are filing Form 2555, Form 2555-EZ, or Form 4563, or are excluding income from Puerto RIco, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. For details, see Pub. 970.
Figure 35-A may be helpful in determining if you can claim an education credit on your tax return.