The American Opportunity Tax Credit (AOTC) is a partially refundable tax credit of up to $2,500 each year for out-of-pocket higher education expenses including course materials, tuition, and fees for the first four years of college. First enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA), the credit was made permanent by the Consolidated Appropriations Act, 2016 (P.L. 114-113). The credit is applied for by using IRS form 8863.

Tax Credit Information

  • Tax credit up to $2,500 of out-of-pocket cost of tuition and related expenses including course materials paid during the taxable year.
  • Eligible for the first four years of college.
  • 100% of the first $2,000 and 25% of the next $2,000.
  • 40% of the credit is refundable with the maximum refundable amount of $1,000.
  • Phase-out for taxpayers with adjusted gross income in excess of $80,000 or $160,000 for married couples filing jointly (AGI phase out limits are $90,000 individual, $180,000 married couples filing jointly).
  • Helps an estimated 4 million additional students attend college than the previous tax credit.
  • $16.581 billion in total benefits for students and families in 2015.
  • Over 10 million students and families claimed the AOTC in 2015 with an average benefit of $1,645.

You must keep a record of your expenses to be eligible!

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