26 USC 25 - American Opportunity and Lifetime Learning credits

View all text of Subpart A [§ 21 - § 26]

§ 25A. American Opportunity and Lifetime Learning credits

(a) Allowance of creditIn the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year the amount equal to the sum of—

(1) the American Opportunity Tax Credit, plus

(2) the Lifetime Learning Credit.

(b) American Opportunity Tax Credit

(1) Per student creditIn the case of any eligible student for whom an election is in effect under this section for any taxable year, the American Opportunity Tax Credit is an amount equal to the sum of—

(A) 100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to the eligible student during any academic period beginning in such taxable year) as does not exceed $2,000, plus

(B) 25 percent of such expenses so paid as exceeds $2,000 but does not exceed $4,000.

(2) Limitations applicable to American Opportunity Tax Credit

(A) Credit allowed only for 4 taxable years

(B) Credit allowed for year only if individual is at least ½ time student for portion of year

(D) Denial of credit if student convicted of a felony drug offense

(3) Eligible studentFor purposes of this subsection, the term “eligible student” means, with respect to any academic period, a student who—

(A) meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in effect on the date of the enactment of this section, and

(B) is carrying at least ½ the normal full-time work load for the course of study the student is pursuing.

(4) Restrictions on taxpayers who improperly claimed American Opportunity Tax Credit in prior years

(A) Taxpayers making prior fraudulent or reckless claims

(i) In general

(ii) Disallowance periodFor purposes of subparagraph (A), the disallowance period is—(I) the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of the American Opportunity Tax Credit under this section was due to fraud, and(II) the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of the American Opportunity Tax Credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud).

(B) Taxpayers making improper prior claims

(1) Per taxpayer credit

(2) Special rules for determining expenses

(A) Coordination with American Opportunity Tax Credit

(B) Expenses eligible for Lifetime Learning Credit

(d) Limitations based on modified adjusted gross income

(1) In generalThe American Opportunity Tax Credit and the Lifetime Learning Credit shall each (determined without regard to this paragraph) be reduced (but not below zero) by the amount which bears the same ratio to each such credit (as so determined) as—

(A) the excess of—

(i) the taxpayer’s modified adjusted gross income for such taxable year, over

(ii) $80,000 ($160,000 in the case of a joint return), bears to

(B) $10,000 ($20,000 in the case of a joint return).

(2) Modified adjusted gross income

(e) Election not to have section apply

(f) DefinitionsFor purposes of this section—

(1) Qualified tuition and related expenses

(A) In generalThe term “qualified tuition and related expenses” means tuition and fees required for the enrollment or attendance of—

(i) the taxpayer,

(ii) the taxpayer’s spouse, or

(iii) any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151,

at an eligible educational institution for courses of instruction of such individual at such institution.

(B) Exception for education involving sports, etc.

(D) Required course materials taken into account for American Opportunity Tax Credit

(2) Eligible educational institutionThe term “eligible educational institution” means an institution—

(A) which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on the date of the enactment of this section, and

(B) which is eligible to participate in a program under title IV of such Act.

(g) Special rules

(1) Identification requirement

(A) In general

(B) Additional identification requirements with respect to American Opportunity Tax Credit

(i) Student

(ii) Taxpayer

(iii) Institution

(2) Adjustment for certain scholarships, etc.The amount of qualified tuition and related expenses otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of subsections (b), (c), and (d)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as—

(A) a qualified scholarship which is excludable from gross income under section 117,

(B) an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title 38, United States Code, or under chapter 1606 of title 10, United States Code, and

(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such individual’s educational expenses, or attributable to such individual’s enrollment at an eligible educational institution, which is excludable from gross income under any law of the United States.

(3) Treatment of expenses paid by dependentIf a deduction under section 151 with respect to an individual is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins—

(A) no credit shall be allowed under subsection (a) to such individual for such individual’s taxable year,

(B) qualified tuition and related expenses paid by such individual during such individual’s taxable year shall be treated for purposes of this section as paid by such other taxpayer, and

(4) Treatment of certain prepayments

(5) Denial of double benefit

(6) No credit for married individuals filing separate returns

(7) Nonresident aliens

(8) Payee statement requirement

[(h) Repealed. Pub. L. 116–260, div. EE, title I, § 104(a)(2), Dec. 27, 2020, 134 Stat. 3041]

(i) Portion of American Opportunity Tax Credit made refundable

(j) Regulations

(Added Pub. L. 105–34, title II, § 201(a), Aug. 5, 1997, 111 Stat. 799; amended Pub. L. 107–16, title IV, § 401(g)(2)(A), June 7, 2001, 115 Stat. 59; Pub. L. 111–5, div. B, title I, § 1004(a), Feb. 17, 2009, 123 Stat. 313; Pub. L. 111–148, title X, § 10909(b)(2)(C), (c), Mar. 23, 2010, 124 Stat. 1023; Pub. L. 111–312, title I, §§ 101(b)(1), 103(a)(1), Dec. 17, 2010, 124 Stat. 3298, 3299; Pub. L. 112–240, title I, §§ 103(a)(1), 104(c)(2)(D), Jan. 2, 2013, 126 Stat. 2319, 2322; Pub. L. 113–295, div. A, title II, § 209(b), Dec. 19, 2014, 128 Stat. 4028; Pub. L. 114–27, title VIII, § 804(a), June 29, 2015, 129 Stat. 415; Pub. L. 114–113, div. Q, title I, § 102(a), title II, §§ 206(a), 208(a)(2), 211(a), Dec. 18, 2015, 129 Stat. 3044, 3082, 3083, 3085; Pub. L. 115–97, title I, § 11002(d)(1)(B), Dec. 22, 2017, 131 Stat. 2060; Pub. L. 115–141, div. U, title I, § 101(l)(1)–(9), (11)–(14), title IV, § 401(b)(1), Mar. 23, 2018, 132 Stat. 1162–1165, 1201; Pub. L. 116–260, div. EE, title I, § 104(a), Dec. 27, 2020, 134 Stat. 3040.)