American Opp. Credit

[keevanhee]

I am curious what the specifics are on this. I believe I meet all the requirements but have never heard of or got any letter saying I need to fill out a certain form if I claim this. Could I get more in-depth on what the money requirement is to meet it along with if it is only because someone is claiming themselves? 

Thanks. 

[DawnC]

Qualifications for claiming the American Opportunity Tax Credit are:

• You paid an eligible student's qualified education expenses for higher education at any college, university, or vocational school with a student aid program administered by the US Department of Education
• The eligible student is you, your spouse, or a dependent on your return
• For the full credit, your MAGI (modified adjusted gross income) is less than $90,000 ($180,000 if you're filing jointly)
  • For a reduced credit, your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you're filing jointly)

An eligible student is defined as a student who:

• Is enrolled at least half-time in a program leading to a degree, certificate, or other recognized credential
• Had at least one academic period beginning during the year
• Didn't claim the American Opportunity Tax Credit for more than three previous years
• Didn't complete the first four years of post-secondary education before the beginning of the year

The American Opportunity Tax Credit cannot be claimed on Married Filing Separately returns nor under any of these conditions:

• The student is a dependent on someone else's return
• The student is a nonresident alien (unless the student's spouse is a resident and they file a joint return treating both as residents, or the parents claim the student as a dependent on their joint return)
• The student had a felony drug conviction

[keevanhee]

Thank you! So does scholarships, student loans and out of pocket tuition costs count towards it? 

[Opus 17]

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@keevanhee wrote:

Thank you! So does scholarships, student loans and out of pocket tuition costs count towards it? 

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It would help if you told us what you are thinking.

The credit is up to $2500 toward college tuition (and other allowed expenses) that you or your parents pay out of pocket.  Expenses that were covered by grants and scholarships, or by a 457 tuition plan, or by other tax-free assistance, don't count, because that would be double-dipping (getting a credit from money that was already tax-free).  

If you can be claimed as a dependent by someone, that person will usually claim the credit for tuition paid on your behalf.

If you claim the credit yourself, you generally don't get free money.  The credit can only neutralize the tax you owe on your income, and you have to earn more than $12,550 before you owe any tax at all.  There is a provision to get $1000 back to you even if you don't owe tax, but to use this benefit, you must be age 24 or older, or if younger, both your parents must be dead.

[MayaD]

Amounts paid for by scholarships aren't considered paid by you. However, the IRS allows you to claim qualifying expenses that you pay with student loan and out of pocket funds towards educational tax credits.

[keevanhee]

Okay, so that would mean that all subsidized and unsubsidized student loans would count towards that 2,500? I just want to be sure that I qualify before I put my taxes through. 

[PattiF]

Yes, if you must repay the loan then higher education expenses paid with a subsidized and nonsubsidized loan qualify for the credit.

@keevanhee

[Opus 17]

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@keevanhee wrote:

Okay, so that would mean that all subsidized and unsubsidized student loans would count towards that 2,500? I just want to be sure that I qualify before I put my taxes through. 

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Because you promised to repay the loan, tuition paid with loans counts as tuition you paid with your own money.  (If the loan is later forgiven or canceled, that becomes taxable income, but that's a story for another day.)