The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. This credit, originally created under the American Recovery and Reinvestment Act, has been extended through 2019.
Who is eligible for the American Opportunity Credit?
To be eligible for AOTC, the student must:
- Be pursuing a degree or other recognized education certification
- 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
- Not have claimed the American Opportunity Credit or Hope credit for more than four years
- Not have a felony drug conviction at the end of the tax year
What is the maximum amount for the American Opportunity Credit?
The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education.
Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000 to put towards your refund, even if you owe no taxes. The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $90,000 ($180,000 for married couples filing a joint return).
Qualified expenses include tuition and fees, course related books, supplies and equipment.
Reduce the qualified educational expenses by the amount of tax-free education assistance allocated to that academic period. (Ex. the tax-free parts of scholarship/fellowship grants, tax-free part of Pell Grants, employer-provided educational assistance, Veterans' educational assistance, any other nontaxable payments other than gifts or inheritance received as educational assistance).
For more information, please see IRS Publication 970 and the IRS article on the American Opportunity Credit.