Is college tuition tax deductible? What is the American Opportunity Tax Credit (AOTC)?
A tax credit worth up to $2,500 for students completing their undergraduate degrees. Who qualifies, and how to claim?
The federal government offers the American opportunity tax credit (AOTC) to students completing their first four years of higher education. As the price of higher education continues to rise, the AOTC can provide some relief to students and their families in need of support.
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What is the value of the credit?
The credit is worth up to $2,500 for each eligible student. The credit can be claimed by either a student or their parent or guardian who claims them as a dependent on their return.
The value of the credit depends on the annual gross income (AGI) of the tax filer:
- The full value of credit is available to those with an AGI of $80,000 or less ($160,000 or less for married filing jointly)
- The amount is reduced if AGI “is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).”
- For those with an AGI over $90,000 ($180,000 for joint filers) the credit cannot be claimed.
To claim the credit, one must report the information on Form 1098-T, Tuition Statement, which will be distributed by the educational institution.
Who is eligible for the credit?
There are a few eligibility requirements to keep in mind. According to the IRS, a student must “be
- pursuing a degree or other recognized education credential
- enrolled at least half time for at least one academic period beginning in the tax year.”
Additionally, the student can’t have “finished the first four years of higher education at the beginning of the tax year” or “claimed the AOTC or the former Hope credit for more than four tax years.” Lastly, those with a felony drug conviction are ineligible.