American Opportunity vs Lifetime Learning Credit — which one pays you more
| American Opportunity (AOTC) | Lifetime Learning (LLC) | |
|---|---|---|
| Credit rate | 100% of first $2,000 + 25% of next $2,000 | 20% of up to $10,000 |
| Maximum credit | $2,500 per student, per year | $2,000 per return, per year |
| Refundable? | Yes — up to $1,000 (40%) | No |
| Who qualifies | First 4 years of undergrad, ≥ half-time, degree or credential program, no drug felony | Any level, any number of years, no degree or enrollment-level requirement |
| Qualified expenses | Tuition, fees, required books & materials | Tuition and required fees only |
| Phase-out (single / HoH) | $80,000 – $90,000 MAGI | $80,000 – $90,000 MAGI |
| Phase-out (married joint) | $160,000 – $180,000 MAGI | $160,000 – $180,000 MAGI |
Thresholds are not indexed for inflation. The 2025 reconciliation law (OBBBA) made the AOTC permanent — it had been scheduled to expire after 2025 — but kept its phase-out unchanged. You cannot claim both credits for the same student in the same year, though a joint return can use AOTC for one student and LLC for another.
| MAGI | AOTC (max $2,500 base) | LLC (max $2,000 base) | Phase-out fraction |
|---|---|---|---|
| $75,000 | $2,500 | $2,000 | 100% |
| $82,000 | $2,000 | $1,600 | 80% |
| $85,000 | $1,250 | $1,000 | 50% |
| $88,000 | $500 | $400 | 20% |
| $90,000+ | $0 | $0 | 0% |
The phase-out is proportional: credit × (90,000 − MAGI) ÷ 10,000 for single filers, × (180,000 − MAGI) ÷ 20,000 for joint. Crossing the bottom of the range by $1 still leaves you 99.99% of the credit — it's the top of the range that kills it, and every $1,000 of MAGI in between costs a single filer $250 of AOTC.
Two credits, one decision. The American Opportunity Tax Credit and the Lifetime Learning Credit both reduce tax dollar-for-dollar, both are keyed to qualified education expenses, and both use the same MAGI phase-out. The differences — who qualifies, how the math works, and whether any of it is refundable — decide which one belongs on your return.
AOTC = 100% × min($2,000, expenses) + 25% × min($2,000, max(0, expenses − $2,000)), capped at $2,500 per student. LLC = 20% × min($10,000, expenses), capped at $2,000 per return. Both then multiply by the phase-out fraction: 1 below $80,000 (single) or $160,000 (joint), then a straight line to zero at $90,000 / $180,000. The refundable piece of the AOTC is 40% of whatever survives the phase-out.
Enter your filing status and MAGI — roughly AGI plus most foreign and exclusions, so for most households the number on your Form 1040 line 11 is close enough. Pick the student type: the AOTC box only applies to the first four years of undergraduate study at least half-time in a degree or credential program. Enter tuition, required fees, and (for AOTC) required books. The calculator shows both credits so you can see the size of the gap, not just the winner.
A sophomore with $6,500 of tuition and required books, single filer with $78,000 MAGI. AOTC: 100% of the first $2,000 ($2,000) plus 25% of the next $2,000 ($500) = $2,500, with $1,000 refundable even at zero tax liability. The LLC on the same expenses: 20% × $6,500 = $1,300, non-refundable. Same MAGI, same tuition, $1,200 apart — and the AOTC money survives a zero tax bill.
Now the phase-out and the eligibility edges. Same student at $85,000 MAGI: the fraction is (90,000 − 85,000) ÷ 10,000 = 50%, so AOTC drops to $1,250 (LLC: $650). A graduate student with $12,000 of tuition at $165,000 joint MAGI can't touch the AOTC at all — the LLC is 20% × $10,000 = $2,000 × 75% = $1,500. And a third-year undergrad at $83,000 MAGI with $5,000 of expenses sees AOTC $1,750 versus LLC $700; picking wrong leaves $1,050 on the table.
For an eligible undergraduate, the AOTC almost always wins: it covers 100% of your first $2,000 of qualified expenses plus 25% of the next $2,000, for a maximum of $2,500 per student, and up to $1,000 of it is refundable. The Lifetime Learning Credit is 20% of up to $10,000, maxing at $2,000, non-refundable. On $6,500 of tuition, that's AOTC $2,500 vs LLC $1,300. But the LLC has no degree, half-time, or four-year limits, so it's the only option for grad students and job-skill courses.
Both credits use the same MAGI phase-out: $80,000 to $90,000 for single and head-of-household filers, and $160,000 to $180,000 for married filing jointly. The credit shrinks proportionally through the range and disappears above it. These thresholds are not indexed for inflation, so they've been unchanged for years; the 2025 reconciliation law made the AOTC permanent but left its phase-out where it was.
Not for the same student in the same year. You can split across students on a joint return — say AOTC for your sophomore and the LLC for your spouse's graduate course — and you can switch credits for the same student in different years. What you can't do is double-count the same tuition dollars toward both credits.
Tuition and required enrollment fees count for both credits. The AOTC also counts books and required course materials even if you buy them off-campus; the LLC does not. Neither credit covers room and board, insurance, transportation, or personal expenses — those can matter for scholarships and 529 distributions, but not here. Expenses paid with tax-free scholarship or grant money don't count.
The AOTC is 40% refundable: of the $2,500 maximum, $1,000 can come back to you even if you owe zero tax, and the remaining $1,500 only offsets tax you actually owe. The Lifetime Learning Credit is entirely non-refundable. That matters for low-income students with small tax bills — the AOTC's refundable piece is real cash, while an LLC larger than your tax liability is wasted.