Credits

This credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give you a refund even if you do not owe any tax.

A credit is available up to $2,500 per student for the first 4 years of higher education for tuition, course related books, activity fees and any equipment that must be purchased from the educational institution as a condition of enrollment. Room & Board expenses do not qualify.
The credit begins to phase out for single taxpayers who have adjusted gross income between $80,000 and $90,000 and for joint tax filers when adjusted gross income is between $160,000 and $180,000. The credit is unavailable to taxpayers whose adjusted gross income exceeds the $90,000 and $180,000 thresholds.

Refundable tax credits include:
Earned Income Credit
Excess Social Security Credit
Additional Child Tax Credit
American Opportunity Credit - partially refundable
Adoption Credit First-time Homebuyer Credit
Health Coverage Tax Credit

Nonrefundable tax credits include:
Child and Dependent Care Credit
Education credits (American Opportunity Credit is also partially refundable)
Residential Energy Credits
Credit for the Elderly or Disabled
Child Tax Credit
Foreign Income Tax Credit
Retirement Savings Contribution Credit

A tax credit reduces the amount of tax for which you are liable. Unlike a deduction, which reduces the amount of income subject to tax, a tax credit directly reduces your tax liability, dollar for dollar.
A tax credit is usually more valuable than a tax deduction of the same dollar amount. There are two categories of tax credits, refundable and nonrefundable.
A nonrefundable credit can reduce your tax liability to zero (0), but not below.
A refundable tax credit is a tax credit that can reduce your tax liability below zero and the amount in excess of the liability is refunded to you.

You cannot claim the Lifetime Learning Credit and the American Opportunity credit in the same year for the same student. You may claim each of the credits for a different student in your family.

Any unused Lifetime Learning credit cannot be carried forward to future years.
The phase out for:
married taxpayers is Adjusted Gross Income between $107,000-$127,000. ($104,000-$124,000 in 2012).
single, head of household or qualifying widower(s) filing status taxpayers phase out is between $53,000 and $63,000.
Married filing separately status are not allowed a Lifetime Learning credit.

You cannot claim the Lifetime Learning Credit and the American Opportunity credit in the same year. You may claim each of the credits for a different student in your family.

Qualified educational expenses would include tuition and required fees, but would not include room and board, insurance, transportation or other personal living or family expenses, medical expenses, supplies or equipment.
The credits are subject to income limitations. The credits are not available for married filing separate returns. Both credits are claimed on IRS Form 8863.
The American Opportunity and Lifetime Learning credits are two federal credits available for qualifying higher education expenses paid to eligible educational institutions.
There may also be similar state credits or deductions available. Generally, the American Opportunity credit is available for the qualified expenses for the first 4 years of post-secondary education leading to a degree.
The Lifetime Learning credit is available for both degree and non-degree courses. This includes undergraduate courses not claimed as a American Opportunity credit, graduate studies, and students acquiring or improving their job skills.