American Opportunity Credit

[skadizzle]

Does the credit only apply to the first four calendar years or the first four years of equivalent credit?

On TurboTax, it says to select no for completing the four years if I haven't completed the equivalent about of credit. I have been going for about 6 years, but the last couple years were part time and I did not obtain the 120 credits that is typical of a senior or 4 year degree. Everywhere else by TurboTax I see that it is first four years of college PERIOD. Any help would be great!

[MinhT1 · Accepted solution]

The American Opportunity credit is available if you have not completed the first four years of of higher education, but you are only allowed to claim it for a maximum of four tax years.

If you have not completed your four years of credit and have previously claimed the credit less than four times, you may be eligible.

The IRS says:

To be eligible for AOTC, the student must:

• 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
• Not have completed the first four years of higher education at the beginning of the tax year
• Not have claimed the AOTC or the former Hope credit for more than four tax years
• Not have a felony drug conviction at the end of the tax year

@skadizzie

I have edited my answer.

[Edited 01/31/22 | 7:32AM PST] 

[skadizzle]

This is the part that confused me. This is from TurboTax directly.

How do I know if I have 4 years of college credit?

Your educational institution can tell you if you've been awarded four years of college-level credit before the current tax year. If you didn't earn this amount, then you may still be eligible for the American Opportunity Credit.

▸ When should I answer "Yes"?

▾ When should I answer “No”?

Choose No if:

• You didn't earn four years of college credit before the current tax year, even if you attended college for four years or more

[Hal_Al]

Q. Does the credit only apply to the first four calendar years or the first four years of equivalent credit?

A.  The first four years of equivalent credit

Answer no to that question, since  you did not obtain the 120 credits required for a 4 year degree at your school.

But, beware of another rule: you are limited to claiming the AOC four times, including the times your parent claimed it, on your education, while you ere their dependent.  If you've been in school 6 years, you may have already got your 4 times.

[skadizzle]

That was my thinking exactly. I just don't want to get audited. I looked back and the credit didn't start until 2010 and I was already out of school in 2009. I just started going back last year.

[Hal_Al]

The AOC is a successor to  the "Hope" Credit.  If your parents claimed the Hope Credit, those times  count against your 4 time limit for the AOC

[skadizzle]

Ahh gotcha. I don't think they claimed it on me four times, but I may have done the other ones. Wish there was a way to check without going back through my returns as there is no way I have them that far back.

[HeatherPLO]

@skadizzle

To locate and verify this information, you can order a free transcript from the IRS using the link here:  IRS - Get Transcript

[taxesx4]

Hi @MinhT1 , My son can be claimed as a dependent (he's 20 and a full time student), but we are NOT claiming him as a dependent.  He is filing his own tax return and TT says that he qualifies for the American Opportunity Credit.  (He meets all the criteria you outlined below and TT says he qualifies also).

He has $917 of federal taxable income (after deductions), but is only getting $54 of credit.  Shouldn't the credit at least cancel out his $917 of federal taxable income?  

I understand that he wouldn't get the additional rebate since he 'can be' claimed as a dependent, but I thought it would cancel out his tax liability.

Additionally, he owes $579 in federal taxes, yet his taxable income is only $917.  This seems extremely high. Is this because we can claim him as a dependent (even though we aren't)?

Thanks for any help you can provide! 🙂

[AmyC]

Someone can claim you is important and does change many things in the return. However, $917 income should not create a liability of $579. That is 63% tax     and even a parent rate would not be 63%. No tax bracket is that high. There is important information missing here. The $54 credit is usually the tax liability offset.

@taxesx4

[Hal_Al]

If some of his tax is from line 23 of form 1040 (e.g. self employment tax), rather than income tax, the non refundable portion of the  American Opportunity Credit cannot be used to offset those taxes.

[pammiepw]

I paid 6000 in tuition and had 10000 in scholarships. Turbo tax is saying I don’t qualify because the aid exceeds the expenses. That’s not true. The aid exceeds the payment amount. The expenses were 16,000. Nothing I find says I don’t qualify. Can anyone help with this?

[Hal_Al]

@pammiepw  What were the $16,000 in expenses?

How much for Tuition and fees?

How much for room & board?

How much for books, computer and other course materials?

What's in boxes 1 and 5 of your 1098-T?

[pammiepw]

The 6,000 was tuition (box 1). 10,000 is in box 5. So, I have a question. If someone pays $20,000 but gets $22,000 in scholarships, are they excluded while someone paying only $10,000 with $8000 in scholarships isn’t? This seems odd to me. 

[AmyC]

As long as there are no restrictions on your scholarship against using it for room and board, then you can move some of it from the tuition payment to room and board section. When you do this, it can become taxable income with the even bigger education credit. Please  look at another of my answers for help on how to do this.

@pammiepw