What is an American Opportunity Tax Credit (AOTC)?

The American Opportunity Tax Credit (AOTC) is an annual tax credit for parents to help cover the cost of college for their college-aged children. 

How does the American Opportunity Tax Credit (AOTC) work?

To be eligible for the American Opportunity Tax Credit (AOTC) you must be a dependent student or parent of a dependent student. In addition to that, there are several other qualifying factors. It’s for qualified education expenses to reach eligible students for the first four years of higher education.

Individuals can get a maximum annual credit of $2,500 per eligible student. If the credit brings your taxes owed to zero, you can have 40% of the remaining amount (up to $1,000) refunded to you.

Who is eligible for the AOTC?

According to the IRS, to be eligible for the credit 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
Frank FAFSA® is Now Open - File Today

There are also income limits for the tax credit. They are as follows:

  • To claim the full credit, your modified adjusted gross income (MAGI) 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).

If you’re not sure if you’re eligible for the AOTC, speak to a tax professional. 

If you have any questions about financial aid, reach out to us at support@withfrank.org.