American Opportunity Credit
Obtain a credit on Individual tax return for tuition and fees paid to accredited colleges and universities.
Commonly referred to as the AOC or AOTC.
Do I Qualify for the American Opportunity Credit?
To qualify for the education credit, an individual or dependent must have qualified expenses at an approved university or school as well as meet income and age limitations.
2022 American Opportunity Credit Details
American Opportunity Credit reduces income tax dollar for dollar. American Opportunity Credit reduces your taxes by up to $2,500 per student for the education expenses of college students pursuing a degree during their first four years of attendance, as long as they are enrolled at least half-time and don’t have a felony drug conviction. The refundable portion of the credit is limited to $1,000. Costs that qualify for the credit include tuition, fees, books, supplies and necessary equipment.
Unused American Opportunity Credit amounts can be claimed as a non-refundable credit on Schedule 3.
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You can reduce your tax liability if you qualify for American Opportunity. You can qualify for up to $1,000 refundable credit above tax liability for American Opportunity credit. You can calculate each credit based on a per-student basis for qualification to determine the most advantageous for each student. All qualified education expenses from all institutions are accumulated to determine the credit amount.
American Opportunity credit is limited to 4 years and only applicable for obtaining a degree postgraduate.
Assumptions When Taking the American Opportunity Credit
• Conflicting Strategies
• None noted.
Requirements to Claim the American Opportunity Credit
To be eligible to claim the American Opportunity, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign. To claim the American Opportunity credit, you must provide the educational institution’s employer identification number (EIN) on your Form 8863.
For 2021, the credits are based on the amount of adjusted qualified education expenses paid for the student in 2021 for academic periods beginning in 2021 or beginning in the first 3 months of 2022. The student must be a dependent of the person filing for the credit. You must be filing a 1040, 1040-SR to claim the credit (Cannot take if filing 1040-NR, MFS, or dual-status return).
Business Entities That Can Claim the American Opportunity Credit
The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.