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. 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.
The amount of the
credit is 100 percent of the first $2,000 of qualified education expenses you
paid for each eligible student and 25 percent of the next $2,000 of qualified
education expenses you paid for that student. But, if the credit pays your tax
down to zero, you can have 40 percent of the remaining amount of the credit (up
to $1,000) refunded to you.
Who is an eligible student for AOTC?
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 finished 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.
*Academic Period can be
semesters, trimesters, quarters or any other period of study such as a summer
school session. The schools determine the academic periods. For schools that
use clock or credit hours and do not have academic terms, the payment period
may be treated as an academic period.
Claiming the credit
Generally, students
receive a Form 1098-T
Tuition Statement, from their school by January 31. This statement helps you
figure your credit. The form will have an amount in box 1 to show the amounts
received by the school during the year. But, this amount may not be the amount
you can claim. See qualified education expenses for more information on what
amount to claim.
Check the Form 1098-T to make sure it is correct. If
it isn’t correct or you do not receive the form, contact your school.
Valid TIN before the due date of the return
A TIN is a Social
Security number, an individual taxpayer identification number (ITIN) or an
adoption taxpayer identification number (ATIN).
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).
You may not claim
the AOTC on a later original return or an amended return if the TIN is issued
on or applied for after the due date of the return (including extensions).
What are the income limits for AOTC?
- To claim the full credit,
your MAGI,?
modified adjusted gross income must be $80,000 or less ($160,000 or less
for married filing jointly).
- You receive a reduced amount
of the credit if your MAGI is over $80,000 but less than $90,000 (over
$160,000 but less than $180,000 for married filing jointly).
- You cannot claim the credit
if your MAGI is over $90,000 ($180,000 for joint filers).
?MAGI for most people is the amount of
AGI, adjusted gross income, shown on your tax return. From your 2018 Form 1040,
add the following amounts to AGI (line 7):
- Foreign earned income
exclusion,
- Foreign housing exclusion,
- Foreign housing deduction,
- Exclusion of income by bona
fide residents of American Samoa, or of Puerto Rico.
