Age comes into play for the refundable portion of the AOTC. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you. See below under "Refundable Part of Credit."
Refundable Part of Credit:
Forty percent of the American opportunity credit is refundable for most taxpayers.
However, if you were under age 24 at the end of 2022 and the conditions listed below apply to you, you can't claim any part of the American opportunity credit as a refundable credit on your tax return.
Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. You don't qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. 1. You were: a. Under age 18 at the end of 2022, or b. Age 18 at the end of 2022 and your earned income (defined below) was less than one-half of your support (defined below), or c. Over age 18 and under age 24 at the end of 2022 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). 2. At least one of your parents was alive at the end of 2022. 3. You are filing a return as single, head of household, qualifying surviving spouse, or married filing separately for 2022.
A student eligible for the American Opportunity tax credit if:
- Has not completed the first four years of post-secondary education.
- Enrolls in at least one academic semester during the applicable tax year.
- Maintains at least half-time status in a program leading to a degree or other credential.
- If the student has ever been a state or federal criminal because of a drug conviction, then they aren't eligible for the tax credit.
In addition to the qualifications above, to claim an exemption for your child, you must be able to answer "yes" to all of the following questions.
- Are they related to you? The child can be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, adopted child or an offspring of any of them.
- Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There is no age limit if your child is permanently and totally disabled.
- Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.
- Do you financially support them? Your child may have a job, but that job cannot provide more than half of her support.
- Are you the only person claiming them? This requirement commonly applies to children of divorced parents. Here you must use the “tie breaker rules,” which are found in IRS Publication 501. These rules establish income, parentage and residency requirements for claiming a child.
Click here for more information on the American Opportunity Tax Credit.
Click here for detailed explanation starting on page 9 & see information on the refundable portion of the credit on page 21 (this is where age comes into play).
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