The two credits side by side
| American opportunity credit | Lifetime learning credit | |
|---|---|---|
| Maximum | $2,500 per eligible student | $2,000 per return, all students together |
| Formula | 100% of the first $2,000 + 25% of the next $2,000 | 20% of the first $10,000 |
| Refundable | 40% may be refunded (up to $1,000) | no |
| Years of school | only if the first 4 years of postsecondary education were not completed before the year | all years, including graduate school and job-skills courses |
| Tax years per student | no more than 4 | unlimited |
| Program and enrollment | pursuing a degree or credential, at least half-time for one academic period | no degree program or minimum load required |
| Felony drug conviction | disqualifies | no such rule |
| Books, supplies, equipment | count, wherever bought | count only if paid to the school as a condition of enrollment |
Both credits require the student to be enrolled at an eligible educational institution, and both generally require Form 1098-T from the school. Publication 970 puts the difference plainly: a deduction reduces the income subject to tax, a credit reduces the tax itself.
The credit at each cost level
| Qualified expenses for one student | American opportunity credit | of which refundable | Lifetime learning credit |
|---|---|---|---|
| $1,000 | $1,000 | $400 | $200 |
| $2,000 | $2,000 | $800 | $400 |
| $3,000 | $2,250 | $900 | $600 |
| $4,000 | $2,500 | $1,000 | $800 |
| $6,000 | $2,500 | $1,000 | $1,200 |
| $10,000 | $2,500 | $1,000 | $2,000 |
lifetime learning = 20% × min(expenses for all students, $10,000)
Where a student qualifies for both, the American opportunity credit is larger at every cost level in the table; the lifetime learning credit matches it only at $10,000 of expenses, and only for one student, because its $2,000 cap is per return. Two undergraduates in the same family can each bring a full $2,500; two graduate students share one $2,000.
The income phase-out
Publication 970 for 2025 returns phases both credits out between $80,000 and $90,000 of modified adjusted gross income, $160,000 and $180,000 on a joint return. Inside the range the credit is multiplied by the share of the range still above your income:
| MAGI, single | MAGI, joint | Share of the credit kept | Full $2,500 credit becomes |
|---|---|---|---|
| $80,000 | $160,000 | 100% | $2,500 |
| $82,500 | $165,000 | 75% | $1,875 |
| $85,000 | $170,000 | 50% | $1,250 |
| $87,500 | $175,000 | 25% | $625 |
| $90,000 | $180,000 | 0% | $0 |
Publication 970 covers who may claim the credit for a dependent's expenses, including expenses the student or someone else paid.
Coordinating with other benefits
- One credit per student per year. You can choose either credit for a student who qualifies for both, but not both.
- No double-dipping. The guide 529 plans explained covers how expenses used for an education credit are treated when figuring a 529 distribution, so the two have to be planned together.
- Student loan interest is a separate deduction, available after school whatever credit was claimed while in it; see student loan interest deduction 2026.
- Planning the cost. The student loan calculator shows the repayment on whatever the credits and savings do not cover, and the savings goal calculator the monthly saving to reach a tuition target.
This guide follows IRS Publication 970 for 2025 returns; the 2026 edition governs 2026 returns once published, and Form 8863 is where either credit is claimed.
Frequently asked questions
What is the difference between the American opportunity credit and the lifetime learning credit?
The American opportunity credit is worth up to $2,500 per eligible student, 40 percent of it refundable, but only for the first four years of postsecondary education, for a student enrolled at least half-time in a degree program, for no more than four tax years. The lifetime learning credit is worth up to $2,000 per return, 20 percent of the first $10,000 of expenses for all students together, is nonrefundable, and has no limit on years or degree requirement, so it covers graduate school and courses to improve job skills.
How is the American opportunity credit calculated?
Per IRS Publication 970: 100 percent of the first $2,000 of qualified education expenses paid for the eligible student plus 25 percent of the next $2,000, so $4,000 of expenses gives the maximum $2,500. Up to 40 percent of the credit, $1,000, may be refunded if it exceeds your tax.
What are the income limits?
For both credits Publication 970 for 2025 returns phases the credit out for modified adjusted gross income between $80,000 and $90,000, or $160,000 and $180,000 on a joint return; at $90,000 or more ($180,000 joint) neither credit can be claimed. Inside the range the credit is reduced in proportion to how far through the range your income is.
Can I claim both credits?
Not for the same student in the same year. Publication 970 says that if you are eligible for both for the same student you can choose either, but not both. Different students on the same return can each have their own credit.
What expenses count?
Tuition and required enrollment fees for both. For the American opportunity credit, course-related books, supplies and equipment count even if not bought from the school; for the lifetime learning credit they count only if they must be paid to the institution as a condition of enrollment. Form 1098-T from the school is generally required to claim the credits.
Sources
General information based on the sources above, not tax, legal or financial advice.