The American Opportunity Tax Credit (AOTC) is a credit of up to $2,500 per year for qualified education expenses paid for an eligible student for the first four years of higher education.
To be eligible for the AOTC, a 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
Qualified expenses are amounts paid for tuition, fees, and other related expenses for an eligible student that are required for enrollment or attendance at an eligible educational institution. These expenses can include books, supplies, and equipment the student needs for a course of study, even if they are not purchased from the school.
Generally, students receive a Form 1098-T Tuition Statement, from their school by January 31. This statement helps you figure your credit. To claim credit for books and supplies, be sure to keep your receipts.
Please note that this doesn’t represent tax advice. As with all tax-related issues, there is a lot of “fine print,” including income limits. Consult with your tax preparer or visit https://www.irs.gov/credits-deductions/individuals/aotc for more information.
The AOTC is an often-overlooked way to reduce educational costs. Along with federal and state grants, aid from colleges, and private scholarships, it can be a key component of an overall plan to make college affordable for your family.