Topic 06 · 6 min read
Family and Education Credits
The credits most households actually use.
The biggest credits for ordinary families reward raising children, paying for care while you work, working at modest income levels, and paying for college. Each has its own age, income, and enrollment rules, and several are partly refundable.
What to know
- Child Tax Credit
- A per-child credit for qualifying children under a set age, with a portion refundable for families whose tax bill is small.
- Earned Income Tax Credit
- A fully refundable credit for lower-income workers that rises with earnings, plateaus, then phases out. It is one of the largest antipoverty programs in the tax code.
- Child and Dependent Care Credit
- Covers part of daycare or after-school care costs paid so a parent can work or look for work.
- American Opportunity Credit
- Covers tuition and required materials for the first four years of undergraduate study, partly refundable.
- Lifetime Learning Credit
- A smaller, nonrefundable credit with no year limit, useful for graduate school or a single job-skills course.
The tax benefit
These credits routinely turn a small tax bill into a refund, and for students they cut the real cost of tuition directly.
Worked example
A first-year college student
A student pays $4,000 of tuition and required books. The American Opportunity Credit covers $2,500 of that, and up to $1,000 can come back as a refund even if no tax was owed.
Watch out for
- Only one education credit can be claimed per student per year.
- Scholarships that already covered tuition cannot also generate a credit.
- Dependency rules decide who claims a child, and two people cannot both claim the same child.
Terms from this topic
Child Tax CreditEarned Income Tax CreditAmerican Opportunity CreditLifetime Learning CreditDependent
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