Published by AE Tax Advisors Team • 2026-07-26

Missed Education Credits Recovered -- $7,500 in Refunds

The Client

William and Sarah Donovan, a married couple in Louisville, Kentucky, had two children attending state universities. William earned $118,000 as a logistics manager and Sarah earned $42,000 as a part-time nurse. Their combined AGI of $160,000 was well within the phase-out range for education credits.

The Problem

For three consecutive years, their tax preparer claimed the Lifetime Learning Credit ($2,000 maximum) instead of the American Opportunity Tax Credit (AOTC, $2,500 maximum per student). With two qualifying students, the family was entitled to $5,000 per year in AOTC credits instead of the $2,000 Lifetime Learning Credit -- a difference of $3,000 per year. Additionally, $1,000 of the AOTC per student is refundable, meaning they left refundable credits unclaimed.

Our Strategy

We amended all three years, switching from the Lifetime Learning Credit to the AOTC for both students. We verified each student met the AOTC requirements -- enrolled at least half-time, pursuing a degree, and within the first four years of post-secondary education. We properly allocated qualified expenses (tuition and required fees) to each student.

The Results

The three amended returns recovered $7,500 in additional credits ($2,500 per year). The refundable portion of the AOTC also generated direct refund payments the family had never received. The Donovans used the recovered funds to reduce their younger child's student loan balance.

Key Takeaway

The American Opportunity Tax Credit provides up to $2,500 per student (not per family) and is partially refundable. Families with multiple college students who are claiming the Lifetime Learning Credit instead may be losing thousands of dollars per year.