Education Tax Credits

Two tax credits are available to persons who pay expenses for higher (postsecondary) education:
American Opportunity Credit Lifetime Learning Credit
Maximum credit $2,500 credit per eligible student $2,000 credit per return
MAGI limit Credit phase-out begins if MAGI is over $160,000 MFJ and $80,000 S, HH, or
QSS No credit if MAGI is $180,000 or more MFJ and $90,000 or more S, HH, or
$138,000) and married couples filing
Refundable or nonrefundable 40% refundable Nonrefundable credit limited to tax
Availability Available ONLY for first 4 years Available ALL years AND for courses
to acquire or improve job skills
Number of tax years credit available Available ONLY for 4 tax years per
eligible student
Available for an UNLIMITED number
of years
Type of degree required Student must be pursuing an
undergraduate degree or other
recognized education credential
Student does not need to be pursuing
a degree or other recognized
education credential
Number of courses Student enrolled at least half-time for
at least one academic period
beginning in the tax year
Available for one or more courses
Felony drug conviction No felony drug convictions on
student’s records
Felony drug convictions permitted
Qualified expenses Books, supplies, and equipment do
not need to be purchased from the
institution in order to qualify
Tuition and required enrollment fees,
including required amounts paid to
the institution for course-related
books, supplies, and equipment

Comparing Traditional and Roth IRAs

Rules Roth IRA Traditional IRA
2023 Contribution Limits $6,500; $7,500 if age 50 or older. $6,500; $7,500 if age 50 or older.
2023 Income Limits Single tax filers with MAGIs of less
than $153,000 (phaseout begins at
$138,000) and married couples filing
jointly with MAGIs of less than
$228,000 (phaseout begins at
$218,000) are eligible.
Anyone with earned income can
contribute, but tax deductibility is
based on income limits and
participation in an employer plan.
Age Limits No age limitations on contributions. No age limitations on contributions.
Tax Treatment No tax deductions for contributions;
tax-free earnings and withdrawals in
Tax deduction in contribution year;
ordinary income taxes owed on
Withdrawal Rules Contributions can be withdrawn at
any time during the tax year, tax-free
and penalty-free. Five years after your
first contribution and age 59½,
earnings withdrawals are tax-free, too.
Withdrawals are penalty-free
beginning at age 59½.
Required Minimum
None for the account owner. Account
beneficiaries are subject to the RMD
Distributions must begin at age 73 for
account owners born between 1951
and 1959 and 75 for those born in
1960 or later. Beneficiaries are also
subject to the RMD rules.

Energy Efficient Home Improvement Credit

  • Taxpayers that make qualified energy-efficient improvements to their home after January 1, 2023, may qualify for a credit of up to $3,200.
  • The credit is allowed for qualifying property placed in service on or after January 1, 2023, and before January 1, 2033.
  • The maximum credit taxpayers can claim each year is:
    1. $1,200 for energy property costs and certain energy-efficient home improvements, with limits on doors ($250 per door and $500 total), windows and skylights ($600 total), and home energy audits ($150)
    2. $2,000 per year for qualified heat pumps, biomass stoves, or biomass boilers

    Residential Clean Energy Property Credit

  • Taxpayers that invest in renewable energy for their home may qualify for an annual residential clean energy tax credit. The Residential Clean Energy Credit equals 30% of the costs of new, qualified clean energy property for the taxpayer's home installed anytime from 2022 through 2033.
  • Qualified expenses include the costs of new clean energy property including:
    1. Solar electric panels
    2. Solar water heaters
    3. Wind turbines
    4. Geothermal heat pumps
    5. Fuel cells
    6. Battery storage technology (beginning in 2023)
    7. Qualified expenses may include labor costs for onsite preparation, assembly, or original installation of the property and for piping or wiring to connect it to the home

    Credit for New Clean Vehicles Purchased in 2023 and After

  • The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032. Taxpayers that place in service a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or after, may qualify for a new clean vehicle credit.
  • Taxpayers may qualify for a credit of up to $7,500 if they buy a new, qualified plug-in EV or FCV. The credit is nonrefundable and taxpayers can not apply any excess credit to future tax years
  • Credit for Used Clean Vehicle

  • Taxpayers may qualify for a credit for buying a previously owned qualified plug-in electric vehicle (EV) or fuel cell vehicle (FCV), including cars and light trucks. Beginning January 1, 2023, taxpayers that buy a qualified used EV or FCV from a licensed dealer for $25,000 or less, may be eligible for a used clean vehicle credit (also referred to as a previously owned clean vehicle credit).
  • The credit equals 30% of the sale price up to a maximum credit of $4,000. The credit is nonrefundable and taxpayers can not apply any excess credit to future tax years.