American Opportunity Tax Credit Overview
What Is the American Opportunity Tax Credit?
Paying for college
is not easy in the best of times. With the economy struggling through a recession,
families need more help than ever. One of the government's responses to this increased
need for financial assistance is the American Opportunity Tax Credit. This tax credit
is available to students and their families as part of the American Recovery and
Reinvestment Act of 2009, also known as the economic stimulus plan.
Unlike the Lifetime Learning Tax Credit, the American Opportunity Tax Credit is student-based.
This means that the credit may be claimed for each eligible student (for example,
if a family has two students in college) rather than just one per tax return.
The American Opportunity Tax Credit is available for the 2011 and 2012 tax years. New features include:
- Eligible students may receive a credit of as much as $2,500.
- All undergraduate college students may now take advantage of this credit.
- Eligibility income limits have increased to $90,000 if filing singly and $180,000
if filing jointly.
- Families with minimal or no tax liability may still receive a refund of as much
- Qualified expenses now include course materials, such as books.
American Opportunity Tax Credit Eligibility
Your eligibility for the American Opportunity Tax Credit is dependent upon:
- Your enrollment status (you must be enrolled at least half-time);
- The amount of qualified tuition and fees you or your parents have paid; and
- The amount of student aid you have received from scholarships and grants.
The American Opportunity Tax Credit may not be claimed against:
- Expenses paid using a 529 Plan or Coverdell Education Savings Account
- Expenses covered by Pell Grants or tax-free scholarships
- Expenses paid for by military education benefits or employer educational assistance
To claim the American Opportunity Tax Credit, you must file IRS Form 8863.