A tax credit reduces your tax bill dollar for dollar. Compare this to a less-valuable tax deduction, which reduces your taxable income. You must multiply a tax deduction by your marginal tax rate to compute the tax savings. Clearly, a credit is worth more than an equal-sized deduction. The federal government offers two tuition tax credit programs. The first is the American Opportunity Tax Credit (AOTC). The credit reimburses eligible students for qualified education expenses, up to $2,500 a year. The credit pays 100% of the first $2,000 in qualified education expenses and 25% of the second $2,000. To qualify, students must: Be working toward a degree or other education credential. Be enrolled at least half time. Not have claimed previous AOTC credits for more than four tax years. Have qualified expenses that include tuition, enrollment fees, and required course materials. Not have finished four years of higher education. Have no convictions for felony drug crimes. Not have a modified adjusted gross income (MAGI) above $90,000 for single filers or $180,000 for joint filers.