If you are a parent who is supporting your children through their college education then the American Opportunity Tax Credit is a great way to get a tax credit for college that can save you money on education expenses. Or, if you are paying your own way through college you could possibly claim this tax credit for yourself.
The American opportunity tax credit (AOTC) is a way for families to reduce the cost of higher education by up to $2,500 per student, each year. It can be used for qualified education expenses for eligible students for the first four years of higher education. There is a 100% credit for the first $2000 of qualified expenses and 25% of the next $2000 up to the $2500 annual limit.
Qualifications for the American Opportunity Tax Credit for College
Eligible students for this tax credit must meet the following qualifications.
- Be enrolled and pursuing a degree or other qualified higher education credential.
- Enrolled as at least a half time sudent for at least one academic period that began during the tax year. An academic period is considered a semester, trimester, quarter or any other designated session such as summer session.
- Must not have finished four years of higher education at the beginning of the tax year.
- Must not have previously claimed the AOTC (formerly called the HOPE credit) for more than four taxable years.
- Must not have a felony drug conviction at the end of the tax year.
- You, your spouse (if filing jointly) and qualifying student(s), must have a valid TIN (Tax Identification Number). A TIN is a valid Social Security number, an individual taxpayer identification number (ITIN) or an adoption taxpayer identification number (ATIN). This TIN must be valid before the due date of the return. If you file late, even with an extension, and the TIN is issued after the original due date, you cannot claim this credit.
What Are the Income Limits for the American Opportunity Tax Credit
As with most tax credits it’s important to know that there are income limits for claiming this education tax credit. For individuals, your modified adjusted gross income (MAGI) can’t exceed $80,000. For a couple who is married and filing jointly the maximum MAGI is $160,000.
If your return exceeds the above limits, you may still be able to claim the credit, however it would be at a reduced credit amount. The MAGI limits are $90,000 individual and $180,000 for married filing jointly to claim the reduced amount.
If your MAGI is over $90,000 individual, or $180,000 joint, then you are not allowed to claim this education tax credit.
Claiming the credit American Opportunity Tax Credit for College
In order to claim the AOTC tax credit the taxpayer must recieve Form 1098-T, tuition statement from an eligible institution for higher education. This tuition statement can be from either a domestic of foreing college, university, or other eligible school or academy. The school, generally, provides this form to students by January 31.
This form, will show the amounts the institution recieved from the student during the annual tax year. This form helps to determine what your credit will be but might not show the amount that you can claim.
For even more information on qualified education expenses you can view the IRS Publication 970 document.
If you need any assistance in filing with the American Opportunity Tax Credit or have other questions or need help with filing your taxes, please contact us. You can use the contact form below or call us at (740) 374-6942.
This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.