If your “back to school” season this year included someone in your household heading off (or back) to college, make sure you know about the American Opportunity Tax Credit! It may reduce the amount of tax you owe when you file in 2019.
What Is the AOTC?
The American Opportunity Tax Credit (AOTC) is an educational credit that qualified taxpayers can claim on their tax return to reduce the amount of tax they owe. This credit serves to offset the costs of the first four years of a student’s undergraduate education.
How Much Money Is the AOTC Worth?
Using the AOTC, you can claim up to $2,500 per eligible student on your tax return. The credit applies to 100% of qualified educational expenses up to $2,000. After that, it will cover 25% of the next $2000 (up to the total credit amount of $2,500).
If applying the AOTC pays your tax liability down to zero, you may even get a refund. You can “keep” up to 40% of the remainder of the credit—up to $1,000—if the amount you’re eligible to claim is larger than what you owe in taxes!
Who Is Eligible for the AOTC?
To qualify for the AOTC, a student must:
- Be in school to earn a degree or some other recognized educational credential
- Be enrolled at least half-time for at least one academic period that starts in the current tax year
- Not have completed four years of higher education when the tax year began
- Not have previously claimed the AOTC for more than four tax years
- Not have been convicted of a felony drug charge by the end of the tax year
- Have a valid social security number (or other tax identification number) that was either issued or applied for on or before the tax return due date
In some cases, the taxpayer who claims the AOTC will be a parent who claims the student as a dependent on their tax return. In other cases, the taxpayer may be the student.
Where Do I Go If I Have Questions?
As exciting as the AOTC is, claiming it can be a little confusing. If you have questions about eligibility, claiming the credit, or the difference between the AOTC and other education credits, the team at Pro Tax Resolution is here to help. We provide tax planning and preparation assistance in Arlington, and we’ll be happy to help you navigate the AOTC. Call our team today to find out how we can help!