The American Opportunity Tax Credit (AOTC) is a tax break that college students or their parents can claim when filing their taxes. It typically offers better tax savings than other educational credits, like Lifetime Learning Credit. The AOTC reduces your tax bill dollar for dollar, rather than reducing your taxable income, up to the amount of $2,500.
To claim the American Opportunity Tax Credit, you must either be a student or parent of a student who:
- Is pursuing a degree or post-secondary credential
- Is in there first four years of post-secondary school
- Is enrolled at least half-time in post-secondary program
- Is enrolled for at least one semester during the tax year
- Has not been convicted of a state or federal drug crime
You can use this credit to claim eligible college or post-secondary school expenses, which could include the cost of tuition, school supplies, books, electronics, and other necessary equipment. You cannot include expenses that were paid for with tax-free scholarships, federal Pell grants, employer tuition grants, or school refunds.
Although the student or parents can claim this credit, they cannot both claim the credit for the same student in a given tax year. So, if you’re a student in 2022 who paid for your own books and laptop, you can claim the AOTC. Your parents would not be able to also claim this credit for you, even if they helped with school expenses.
You can claim 100% of the first $2,000 you spent on qualifying costs, and 25% of any expenses over this amount. The credit is capped at $2,500 per year. If you’re a single filer and your income exceeds $90,000, you’re not eligible for the AOTC (married filers earning over $180,000 also cannot claim this credit).
To claim this credit, you’ll file tax form 8863, Education Credits.