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What is the American Opportunity Tax Credit (AOTC)?

The American Opportunity Tax Credit (AOTC) is a tax credit available to help students and their families offset the cost of higher education expenses. It was introduced as part of the American Recovery and Reinvestment Act of 2009 and has been extended several times since then.

The AOTC allows eligible taxpayers to claim a credit based on qualified education expenses incurred during the first four years of post-secondary education. This includes tuition, fees, and course materials required for enrollment in an eligible educational institution. It is important to note that room and board expenses do not qualify for the AOTC.

The maximum annual credit amount per student is $2,500, and the credit is partially refundable, meaning that even if a taxpayer owes no taxes, they may still receive up to $1,000 as a refund. The actual credit amount is determined based on a percentage of the qualified expenses paid, with the credit gradually phasing out for higher-income taxpayers.

To be eligible for the AOTC, the student must be pursuing a degree or other recognized educational credential, enrolled at least half-time for at least one academic period during the tax year, and not have completed the first four years of post-secondary education prior to the tax year. Additionally, there are income limits and other requirements that need to be met.

It’s important to consult with a tax professional or refer to the official IRS guidelines to determine eligibility and ensure proper claiming of the American Opportunity Tax Credit.