Reduction of Education Credit

[Toyota25]

If I made less income 2024 compared with 2023 why is my EDUCATION CREDIT drastically reduced by $1,200.00?

Additional Info: I did move states in the summer so my university changed. But tuition remained in the same ball park.

[AmyC]

The credit is partially refundable at $1,000 and the rest is based on your tax liability. If your tax liability was reduced by $1200, that would reduce your credit.

See IRS college questions for more information, including:

40 percent of the credit for which you qualify that is more than the tax you owe (up to $1,000) can be refunded to you. 

[Toyota25]

I'm sorry, so does that mean the Education Credit is based on income? The less I make the less credit I get?

[Vanessa A · Accepted solution]

Yes, that is correct.  For the American Opportunity Tax Credit, to get the full credit, you have to have a tax liability. There isn't necessarily a lower limit, but there is an upper limit. If you make more than $90,000 as a single taxpayer, you are not eligible for the credit at all.  If you make less than that, your eligibility for the FULL credit is limited based on your tax liability.  So, even if you make $50,000, but have other tax credits that lowered your tax liability, you may not be able to claim the non-refundable portion, but you can still claim the refundable portion of up to $1,000. It is the same way if you made $10,000 for the year and have no tax liability, you would be eligible only for the $1,000 not for the full $2,500. 

If you are looking at the lifetime learning credit, then, you must have a tax liability to claim this credit as it is a totally non-refundable credit.  So, if you make too little that you do not have a tax liability, then you would not be eligible to claim this credit.