The American Opportunity Tax Credit is intended for qualified education expenses to help alleviate the costs of higher education for either students or their parents if the student is considered a dependent.
The AOTC provides a $2,500 tax credit for each eligible student annually. This means a $2,500 credit for each eligible student per year for the initial four years of higher education.
To qualify for the credit, your modified adjusted gross income (MAGI) must not exceed $80,000 (or $160,000 if filing jointly as a married couple).
American Opportunity Tax Credit (AOTC) 2024
The American Opportunity Tax Credit (AOTC) is a credit that applies to qualified education expenses for a qualifying student of higher education. It assists with costs associated with education, including tuition and other expenses linked to a student’s studies. Room and board, medical costs, transportation, and insurance do not qualify, nor do qualified expenses paid for with 529 plan funds.
How much is it?
The American Opportunity Tax Credit offers a maximum annual credit of $2,500 for each eligible student for the first four years of higher education. Each student can claim a 100% credit for the first $2,000 of qualified education expenses and then 25% of the next $2,000. If the credit reduces your tax bill below zero, you may be eligible to receive a refund of 40% of the remaining credit, up to $1,000.
Requirements to claim an AOTC
To claim the AOTC, you must meet the following requirements:
- You must make payments for qualified education expenses for higher education.
- You must cover the education expenses for a qualified student.
- The qualified student must be either yourself, your spouse, or a dependent listed on your tax return.
- The individuals (or their dependents) must have received a Tuition Statement from an eligible educational institution.
For married couples filing jointly, you must have a modified adjusted gross income (MAGI) of $160,000 or lower. You can still receive a reduced amount of the credit if your MAGI is above $160,000 but below $180,000. However, you are not eligible to claim the credit if your MAGI surpasses $180,000.
Who qualifies for the American Opportunity Tax Credit (AOTC) in 2024?
The AOTC is available to students who meet specific criteria. To be eligible for the AOTC, a student must:
- Be pursuing a degree or a recognized educational credential
- Be enrolled at least half-time for at least one academic period during the tax year
- Have not completed the first four years of higher education at the beginning of the tax year
- Have not claimed the AOTC or the former Hope credit for more than four tax years
- Have no felony drug conviction at the end of the tax year
How to claim the AOTC
- Confirm that the details on your Form 1098-T from your university are accurate.
- To claim the credit, fill out Form 8863 PDF and submit it with your Form 1040 or 1040-SR when you file your tax return.
- Enter the nonrefundable part of the credit on Schedule 3 of your 1040 or 1040-SR, line
- Enter the refundable portion of the credit on line 29 of the 1040 or 1040-SR.
Make sure you meet the qualifications for the credit and keep copies of all documents you used to determine your eligibility and the credit amount. If the IRS finds an error in your claim for the American Opportunity Tax Credit (AOTC) and you cannot prove your eligibility, you will need to repay the AOTC amount received, along with interest. There may also be an accuracy or fraud penalty, or you could be prohibited from claiming the AOTC for two to ten years.
If your claim for the AOTC was rejected in a previous tax year, you may need to file Form 8862 PDF before claiming the credit in future tax years.
