The American Opportunity Tax Credit (AOTC) is an education tax credit that helps eligible students and families offset the cost of higher education. If you paid qualified education expenses for an eligible student during the tax year, you may be able to claim a credit of up to $2,500 per student.
Because the AOTC is a tax credit rather than a deduction, it directly reduces the amount of tax you owe and may even increase your refund.
Who Is Eligible for the American Opportunity Tax Credit?
To qualify for the American Opportunity Tax Credit, the student must meet all of the following requirements:
- Be pursuing a degree or another recognized educational credential.
- Be enrolled at least half-time for at least one academic period that began during the tax year.
- Not have completed the first four years of higher education before the beginning of the tax year.
- Not have claimed the American Opportunity Credit or the former Hope Credit for more than four tax years.
- Not have a felony drug conviction at the end of the tax year.
The credit may be claimed for qualified expenses paid for yourself, your spouse, or a dependent listed on your tax return, provided all eligibility requirements are met.
How Much Is the American Opportunity Tax Credit Worth?
The maximum American Opportunity Tax Credit is $2,500 per eligible student.
Up to 40% of the credit is refundable, which means you may receive up to $1,000 as part of your refund even if you do not owe any federal income tax.
For tax year 2026, the full credit is generally available to taxpayers with a modified adjusted gross income (MAGI) of $90,000 or less ($180,000 or less for Married Filing Jointly). The credit gradually phases out for taxpayers with income above these amounts.
What Expenses Qualify for the Credit?
Qualified education expenses generally include:
- Tuition required for enrollment or attendance
- Mandatory enrollment fees
- Required books
- Required supplies
- Required equipment needed for coursework
Unlike some other education tax benefits, books, supplies, and equipment may qualify even if they were not purchased directly from the educational institution, provided they were required for enrollment or attendance.
Reduce Expenses by Tax-Free Education Assistance
When calculating the credit, you must reduce your qualified education expenses by any tax-free educational assistance received for the same academic period.
Examples of tax-free educational assistance include:
- The tax-free portion of scholarships and fellowship grants
- The tax-free portion of Pell Grants
- Employer-provided educational assistance
- Veterans' educational assistance benefits
- Other nontaxable educational assistance payments
Gifts, inheritances, and certain loans generally do not reduce qualified education expenses.
Can I Claim the Credit for More Than One Student?
Yes. The American Opportunity Tax Credit is calculated on a per-student basis.
If you have multiple eligible students, you may be able to claim the credit for each student who meets the requirements. However, the same education expenses cannot be used to claim more than one education tax benefit.
What Forms Do I Need?
Most taxpayers claiming the American Opportunity Tax Credit will receive Form 1098-T, Tuition Statement, from their educational institution.
You'll generally use information from:
- Form 1098-T
- Tuition payment records
- Receipts for books, supplies, and required equipment
- Scholarship and grant documentation
The credit is claimed on Form 8863, Education Credits, which is filed with your federal tax return.
Key Takeaway
The American Opportunity Tax Credit can provide up to $2,500 per eligible student for qualified higher education expenses during the first four years of post-secondary education. Because a portion of the credit is refundable, it can be especially valuable for students and families looking to reduce the cost of college.
For more information, please see IRS Publication 970.