The American Opportunity Tax Credit (AOTC) is a significant tax credit of up to $2,500 per year that can be used to help offset the cost of the first four years of college. Before you think about claiming this credit on your taxes, though, it’s important to make sure you know the ins and outs of when and how you can claim it.
When it comes to the AOTC, the primary considerations are as follows:
- The person for whom you claim the credit (usually yourself, your spouse, or your dependent) pays qualified education expenses for higher education
- That person is enrolled at an eligible educational institution (usually an institution that qualifies for participation in a student aid program administered by the U.S. Department of Education)
- The person for whom you claim the credit is listed on your tax return
If you, your spouse, or a dependent meet these specifications and are in the first four years of college, you’re on the right track to qualify for the AOTC! Next, you need to take into account these further requirements. The person for whom you claim the credit must:
- Be pursuing a college degree or other recognized educational credential
- Be enrolled at least half time in school AND be enrolled for a minimum of one academic period (semester, trimester, quarter, etc.) beginning in the applicable tax year
- Not yet have completed the initial four years of higher education at the commencement of the tax year in question
- Not have claimed the AOTC (or the Hope credit, an educational credit offered in previous years) for more than four tax years, whether consecutive or non-consecutive
- Not have been convicted of a felony drug offense at the close of the tax year
This may sound like a lot of rules, but they all serve to make sure that only students who are legitimately pursuing higher education are able to claim the AOTC.
For help navigating the regulations surrounding the American Opportunity Tax Credit, call Taxation Solutions, Inc. today! We’re here to help folks in Mesa understand the complexities of the tax code, and to make sure you claim the maximum educational tax credit for which you’re eligible.