The American Opportunity Tax Credit

What is the AOTC?

The American Opportunity Tax Credit is a tax credit that can be taken by college students or parents of college students if they claim the student as a dependent. You can claim up to $2500 in credits per student (100% of the first $2,000 of education expenses, 25% of the second $2,000). Some of the expenses that qualify include tuition, fees, and course materials.  The credit is first applied to any taxes owed and may reduce the balance to zero. If not all of it is used to bring your tax balance to zero, 40% of the remaining credit (up to $1,000) is refundable. Read on to see if you or someone you know qualifies!

How do I qualify?

In order to qualify, the student needs to be enrolled in post-secondary school at least half time (6 credits), and they need to be working towards a degree or certificate. They also need to have a valid TIN and cannot have any felony drug convictions. For tax purposes, a TIN is a Social Security number, an individual taxpayer identification number (ITIN) or an adoption taxpayer identification number (ATIN). Finally, you or whoever is claiming you as a dependent can’t have a modified adjusted gross income of $90,000 or more ($180,000 or more if married filing jointly) and cannot use the married filing separately filing status.

How many years can I claim the AOTC?

The AOTC can be claimed for four years. However, those years do not have to be consecutive. Since a student can claim the credit 4 separate times across the student’s college career, it’s important to keep track of which years this credit is utilized. 

Claiming the Credit

After determining eligibility for the AOTC, taxpayers can claim the credit by completing IRS Form 8863. This form will help determine the amount of eligible tax credits. To complete the form, the taxpayer will need to have the student’s 1098-T and a copy of receipts for deductible books, supplies, and fees.

 

If you or someone you know needs help with their tax return and all of its accompanying credits, contact us! We would love to help.