Key Takeaways
- The Child Tax Credit ($2,200/child, up to $1,700 refundable via ACTC) covers kids under 17; full rules are on the dedicated CTC page.
- The American Opportunity Tax Credit ($2,500/student) and Lifetime Learning Credit ($2,000/return) are both now permanent under the OBBBA, with aligned income limits ($80K-$90K single, $160K-$180K joint).
- The new Federal Scholarship Tax Credit lets you donate up to $1,700/year to an approved Scholarship Granting Organization for a dollar-for-dollar credit, but only in states that opt in (27 so far) and only starting with 2027 tax returns filed in 2028.
- Only one of AOTC or LLC can be claimed per student per year - compare which gives the bigger benefit.
Raising a child in today’s world is not cheap. Estimates for raising a child from birth through college in a middle-class household commonly range from $200,000 to $400,000, and those costs keep climbing as education, health care, and everyday living expenses rise.
The federal government offsets some of that cost through a handful of tax breaks. Some are tied to having young kids, some kick in once they’re in college, and one brand-new credit won’t be claimable until 2027. Here’s what’s actually available and how they fit together.
Child Tax Credit and Additional Child Tax Credit
The core benefit for parents of kids under 17 is the Child Tax Credit (CTC), currently $2,200 per qualifying child, with up to $1,700 per child refundable through the Additional Child Tax Credit (ACTC) if your tax bill is already at zero. Claiming it now requires the taxpayer (or at least one spouse, if filing jointly) to have a valid Social Security Number, a change enacted under the One Big Beautiful Bill Act (OBBBA).
I cover the full income phase-outs, qualification tests, and ACTC math in detail on my dedicated Child Tax Credit page — worth a look if you want the complete rules rather than the summary here.
A couple of examples: A married couple filing jointly with two qualifying kids under 17 and a household income of $95,000 would generally claim the full $4,400 CTC ($2,200 x 2), reducing their tax bill dollar for dollar. A single parent with one child and $28,000 in earned income but little to no tax liability would instead rely mostly on the ACTC — receiving up to $1,700 as a refund, calculated as 15% of earnings above $2,500.
Once a child turns 17, the CTC goes away, though you may still qualify for the $500 Other Dependents Credit if they still qualify as your dependent. That’s when the credits below start to matter more.
American Opportunity Tax Credit (AOTC)
The American Opportunity Tax Credit offers up to $2,500 per eligible student for qualified higher education expenses — 100% of the first $2,000 of expenses, plus 25% of the next $2,000. The OBBBA made this credit permanent, removing what had been a recurring expiration risk.
Income limits for 2025 and 2026:
- Full credit: MAGI of $80,000 or less (single) / $160,000 or less (married filing jointly)
- Partial credit: MAGI between $80,000-$90,000 (single) / $160,000-$180,000 (joint)
- No credit: MAGI above $90,000 (single) / $180,000 (joint)
The AOTC only covers a student’s first 4 years of post-secondary education, and the student must be enrolled at least half-time in a degree or credential program. It’s available for the student, you, or your spouse — but not if the student is claimed as a dependent on someone else’s return while also trying to claim it themselves.
A couple of examples: A parent whose freshman pays $4,000 in tuition and required fees could claim the full $2,500 credit (100% of the first $2,000, plus 25% of the next $2,000), assuming income is under the limit. A married couple filing jointly with $170,000 MAGI would only get a partial credit, since that falls in the $160,000-$180,000 phase-out range.
Lifetime Learning Credit (LLC)
The Lifetime Learning Credit provides up to $2,000 per tax return (not per student) for tuition and required fees, and it’s more flexible than the AOTC — it covers all years of post-secondary education plus courses taken to acquire or improve job skills, with no degree requirement.
This is also now permanent under the OBBBA, and its income limits have been aligned with the AOTC’s: full credit up to $80,000 MAGI (single) / $160,000 (joint), phasing out completely at $90,000 / $180,000. That’s a meaningful change from the LLC’s older, lower thresholds.
Only one credit — AOTC or LLC — can be claimed per student per year, so compare which one gets you more before filing.
A couple of examples: The LLC covers 20% of up to $10,000 in qualified expenses, so a parent taking a single $1,500 professional-certificate course (no degree required) would only get a $300 credit, not the full $1,500 — worth knowing before assuming it works like the AOTC’s first-dollar coverage. A family with two kids in college the same year, both still within the AOTC’s 4-year limit, would generally do better claiming AOTC separately for each student rather than combining expenses under one LLC claim.
New for 2027: The Federal Scholarship Tax Credit (FSTC)
The OBBBA also created an entirely new credit that starts in 2027: the Federal Scholarship Tax Credit (FSTC), sometimes called the Education Freedom Tax Credit.
Here’s how it works: individual taxpayers can contribute up to $1,700 per year to an IRS-approved Scholarship Granting Organization (SGO) and claim a dollar-for-dollar, nonrefundable federal tax credit for that amount. It’s not a credit for your own child’s tuition directly — it’s a credit for donating to an organization that awards K-12 scholarships, similar to state-level tax-credit scholarship programs that already exist in several states.
A few things to know before counting on this one:
- It only works in “covered states.” A state (or DC) has to formally opt in and submit a list of approved SGOs to the IRS before its residents can claim the credit for donations to that state’s organizations. As of mid-2026, the IRS has confirmed 27 states have signed on; others are still deciding, and at least two governors have said their states won’t participate.
- You can’t claim it yet. Contributions only start counting on or after January 1, 2027, and the credit is claimed on 2027 tax returns filed in 2028 — not on the return you’re filing this coming season.
- It’s capped and nonrefundable. Donate more than $1,700 and you don’t get credit (or a refund) for the excess.
If your state opts in, this is worth watching for 2027 — but there’s nothing to do about it on your current tax return.
A couple of examples: If you live in one of the 27 covered states and donate $1,700 to an approved SGO in January 2027, you’d claim the full $1,700 as a credit on the 2027 return you file in 2028 — regardless of your income. If you donate $2,500 to that same SGO, you’d still only get credit for $1,700; the extra $800 isn’t refunded or carried forward.
Earned Income Tax Credit (EITC)
The EITC supplements the wages of low-income workers and families and lifts more children out of poverty than any other single federal program. See the current EITC tables and qualification thresholds here by filing status and income.
A couple of examples: A single parent with two kids earning $32,000 a year would likely qualify for a substantial EITC on top of the CTC/ACTC — often several thousand dollars combined. A married couple with no kids and modest income can also qualify for a smaller EITC, since the credit isn’t limited to parents.
Quick Comparison
| Credit | Max Amount | Income Limit (Single) | Income Limit (Joint) | Status |
|---|---|---|---|---|
| Child Tax Credit | $2,200/child | $200,000 | $400,000 | Current |
| Additional Child Tax Credit | $1,700/child (refundable) | Same as CTC | Same as CTC | Current |
| American Opportunity Tax Credit | $2,500/student | $90,000 (phases out from $80K) | $180,000 (phases out from $160K) | Current, now permanent |
| Lifetime Learning Credit | $2,000/return | $90,000 (phases out from $80K) | $180,000 (phases out from $160K) | Current, now permanent |
| Federal Scholarship Tax Credit | $1,700/year (donation) | No income limit | No income limit | Starts 2027 (covered states only) |
Subscribe here and I’ll update this if more states opt into the FSTC or figures change for 2027.
Looking Ahead: 2027
2027 is the year to watch: it’s the first year the Federal Scholarship Tax Credit becomes claimable, and more states may still opt in before their SGO lists are due to the IRS. I’ll update the state-participation count and add a state-by-state breakdown once the list firms up closer to the 2027 filing season.
