The American Opportunity Tax Credit, formerly the Hope credit, is designed to encourage persons to seek further education and to reduce the cost of the first 4 years of College or Vocational school. It was due to expire in 2013, but the Tax Credit has now been made permanent. You can get a maximum annual credit of $2,500 per eligible student.
Who is Eligible?
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
What are the Income Limits?
- 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).
Claiming the credit
Generally, students receive a Form 1098-T Tuition Statement, from their school by January 31. The form will have an amount in either box 1 or 2 to show the amounts received or billed 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.
To claim AOTC, you must complete the Form 8863 and attach the completed form to your Form 1040 or Form 1040A.
What is the AOTC worth?
Depending on income the credit can be as much as $2,500 with 60% of that amount being in the form of a tax credit, and an additional 40% a refundable credit for taxpayers that qualify.
Documents have been updated December 2016. If you have further questions, please contact us.