Does the American Opportunity Tax Credit reduce each year you claim it?

[BobinCT · Accepted solution]

No.  It doesn't work like that.  But for young students it is normally limited to offsetting the income taxes that would otherwise have been due, so if your taxable income  has been declining that would explain why your AOC was declining.

(This answer assumed that you are the student and are not being claimed as a dependent.  If you are a student's parent, then the declining credit might be because your income was increasing.)

[KiaraE]

The credit amount is equal to 100 percent of the first $2,000 of qualified expenses plus 25 percent the expenses in excess of $2,000. However, the maximum annual credit per student is $2,500.

[BobinCT]

But for most students it's a nonrefundable credit. If the student is claiming it.