American Opportunity Tax Credit (AOTC) (2024)

FAQs

How to get the full $2500 American Opportunity Credit? ›

Be pursuing a degree or other recognized education credential. Have qualified education expenses at an eligible educational institution. Be enrolled at least half time for at least one academic period* beginning in the tax year. Not have finished the first four years of higher education at the beginning of the tax year.

American Opportunity Credit phaseout – If your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if you're married filing jointly), your eligibility will start to “phase out” — meaning you may only qualify for a partial credit or none at all.

The most common AOTC errors are claiming the credit for a student: who didn't attend an eligible educational institution, who already completed the first four years of post-secondary education, for whom qualifying college or other post-secondary education expenses weren't paid, or.

You may not claim the AOTC unless you, your spouse (if you are filing a joint return) and the qualifying student have a valid taxpayer identification number (TIN) issued or applied for on or before the due date of the return (including extensions).

The 1000 came from the 8863. While the total amount of the AOC is worth up to $2,500, only $1,000 of the AOC is actually refundable. This means you can use the other portion to reduce your tax liability if you have any. But, only $1,000 can be directly added to your refund without any tax liability.

The AOTC is a tax credit worth up to $2,500 per year for an eligible college student. It is refundable up to $1,000. If you are a college student filing your own return, you may claim this credit a maximum of four times (i.e. once per year for four years).

For tax year 2023, the credit begins to phase out for single taxpayers who have adjusted gross income between $80,000 and $90,000 and joint tax filers when adjusted gross income is between $160,000 and $180,000.

As a student, you can claim the credit on your taxes for a maximum of four years as long as no one else, like your parents, claims you as a dependent on their tax returns.

If you were under age 24 at the end of 2023 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Instead, you can claim your allowed credit, figured in Part II, only as a nonrefundable credit to reduce your tax.

The maximum amount you can claim on the LLC is $2,000 per year, compared to $2,500 for the AOTC. The AOTC can only be claimed for the first four years of undergraduate studies, while the LLC can be applied to undergraduate and graduate programs, as well as some trade schools and professional programs.

Can you only claim AOTC for 4 years? ›

The American Opportunity Tax Credit can be claimed for expenses for the first four years of post-secondary education. It is a tax credit of up to $2,500 of the cost of qualified tuition and related expenses paid during the taxable year.

You may not qualify for an education tax credit if you earn more than the income limits, if you didn't pay the educational expense you're claiming the credit for, if someone else can claim you as a dependent for tax purposes, or if your tax filing status is married filing separately.

For example, if you have a grant or scholarship that fully covers all of your tuition, fees, and books, then you can't claim the American Opportunity Credit because you didn't actually pay for qualifying expenses.

What expenses are eligible for the American Opportunity credit? Qualified education expenses include amounts spent tuition and required fees and materials for course enrollment. This includes books, supplies, and equipment needed for a course of study.

The American Opportunity Tax Credit is for undergraduate college students only. To qualify, students must meet the following criteria, according to the IRS: Be pursuing a degree or other recognized education credential. Be enrolled at least half time for at least one academic period beginning in the tax year.

You reduce the amount of tax you owe dollar for dollar by the amount of the AOTC for which you qualify up to the amount of tax you owe. If the amount of the AOTC is more than the tax you owe, then up to 40 percent of the credit (up to $1,000) can be refunded to you.