This article was updated for Tax Year 2023, last edited on December 21st, 2023.
The American Opportunity Tax Credit (AOTC) allows eligible students to claim a credit for qualifying educational expenses during their first four years of higher education. A maximum annual credit of $2,500 is available for each eligible student.
The law mandates that a taxpayer (or a dependent) must have received Form 1098-T from an eligible educational institution (whether domestic or foreign) in order to be eligible to claim the AOTC. This form is typically provided to students by their school by January 31.
The IRS has an interactive app that can help you determine if you are eligible for education credits and deductions: Am I Eligible to Claim an Education Credit?
Qualifications for this credit are as follows:
Be pursuing a degree or other recognized education credential
Must be attending an eligible educational institution
The student is yourself, your spouse, or a dependent that is listed on your tax return
The student must be an eligible student, which is defined by the following:
Be enrolled at least half time for at least one academic period beginning in the tax year
Not have finished the first four years of higher education at the beginning of the tax year
Not have claimed the AOTC or the former Hope credit for more than four tax years
Not have a felony drug conviction at the end of the tax year
You can claim an education credit for qualified education expenses paid by cash, check, credit or debit card or paid with money from a loan.
Note: Per the IRS, if you pay the expenses with money from a loan, you take the credit for the year you pay the expenses, not the year you get the loan or the year you repay the loan.
Who cannot claim an education credit?
You cannot claim an education credit when any of the following are true:
Someone else lists you as a dependent on their tax return
Your filing status is married filing separately
You already claimed or deducted another higher education benefit using the same student or same expenses (see Education Benefits: No Double Benefits Allowed for more information)
You (or your spouse) were a non-resident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes (find more information in Publication 519, U.S. Tax Guide for Aliens)
Examples of Typical Qualifying Expenses
The following are qualifying education expenses:
Tuition
School fees and other related expenses
Activity fees required by the institution for enrollment
For the AOTC, there are additional expenses that qualify:
Books
School-related supplies
Equipment needed for a course of study
Note: If you receive tax-free educational assistance, such as a grant, you need to subtract that amount from your qualified education expenses.
To learn more about the differences between the AOTC and LLC, click here.
Additional Resources:
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