What Is the American Opportunity Credit?
The American Opportunity Credit (AOC) is a tax credit that helps eligible post-secondary students offset the cost of their tuition, fees, and course materials. It was created by the American Recovery and Reinvestment Act of 2009 and is available for the first four years of post-secondary education. The maximum credit amount is $2,500 per eligible student, and 40% of the credit is refundable, meaning that if the credit amount exceeds the student’s tax liability, the student can receive a refund for the difference.
Who Is Eligible for the AOC?
To qualify for the AOC, a student must meet the following criteria: be enrolled at least half time in a program leading to a degree, certificate, or other recognized educational credential; have not yet completed the first four years of post-secondary education; have a valid Social Security Number; and not be claimed as a dependent on another person’s tax return. Additionally, the student’s modified adjusted gross income must be below certain levels.
How Does the AOC Work?
The AOC is available for up to $2,500 in expenses for tuition, fees, and course materials. If the student’s modified adjusted gross income is below $80,000 (or $160,000 if filing a joint return), they can claim the full amount of the credit. If the student’s modified adjusted gross income is between $80,000 and $90,000 (or $160,000 and $180,000 for joint returns), they can claim a partial amount of the credit. Any unused portion of the credit can be carried forward to future tax years.
What Expenses Are Eligible for the AOC?
The AOC can be used to offset the cost of tuition, fees, and course materials for post-secondary education. Tuition and fees must be paid to an eligible educational institution and are subject to certain limits. Course materials can include books, supplies, and other items that are required for enrollment or attendance at the educational institution. The AOC cannot be used to pay for room and board, transportation, or other living expenses.
Are There Any Other Benefits of the AOC?
In addition to helping to offset the cost of post-secondary education, the AOC also provides other benefits. For example, the AOC can help to reduce the amount of taxes owed or increase the amount of a tax refund. Additionally, some states offer additional tax credits for students who claim the AOC on their federal tax return.
How Do I Claim the AOC?
In order to claim the AOC, students must file a federal tax return and complete Form 8863. The form must include the student’s Social Security Number, the name and address of the eligible educational institution, and the amount of tuition and fees paid. The form must also include the student’s modified adjusted gross income and the amount of the credit being claimed. Once the form is completed, it should be submitted along with the student’s federal tax return.
What If I Don’t Qualify for the AOC?
If you don’t qualify for the AOC, there are still other options available to help offset the cost of post-secondary education. For example, you may be eligible for other tax credits such as the Lifetime Learning Credit. Additionally, some states offer their own tax credits for post-secondary education expenses. It’s important to research all of your options to determine which is the best fit for your situation.
Conclusion
The American Opportunity Credit is a great way to help offset the cost of post-secondary education. It can be used to pay for tuition, fees, and course materials and can provide additional benefits such as reducing the amount of taxes owed or increasing the amount of a tax refund. If you’re eligible, be sure to take advantage of the AOC in 2023.
