The AOTC is one of the credits available for students who are in their first 4 years of expanding their education. The maximum amount of the credit is $2,500 per student who qualifies. In the event that the credit brings your tax balance to zero, up to one thousand dollars (40%) will come to you in the form of a refund.
Qualifying For the American Opportunity Credit
In order to receive the American Opportunity Credit you must:
- Be working on a degree or other recognized educational credential
- Be attending school at least half time for one academic period
- Be in your first 4 years of higher education
- Not have claimed the credit or the Hope credit for more than 4 years
- Not have a felony drug conviction
(Academic Period refers to semesters, quarters, trimesters and any other period of study. The school determines academic periods. For schools, that use credit hours instead of academic terms, payment periods are used as academic periods.)
Income Limitations for the American Opportunity Credit
- Your MAGI is less than $80,000 or $160,000 for those filing married filing jointly
- If your MAGI is between $80,000 and $90,000 or $160,000 and $180,000 for married filing jointly, you will receive a reduced amount of the credit
- If your modified adjusted gross income is more than $90,000 or $180,000 for married filing jointly, you cannot claim the credit.
(You can find out your MAGI by looking on line 22 on Form 1040A or line 38 on Form 1040.)
How to Claim the American Opportunity Credit
Usually, you will receive Form 1098-T by the end of January so you can determine your credit amount. Box 1 or 2 of the form will show the amounts received/billed throughout the year. However, you will have to look at your qualified education expenses to see what amount you can claim, the amount shown in the boxes is not always automatically the amount. Additionally, you want to make sure that the form is accurate and if it is not contact your school. To claim the credit you have to fill out Form 8863 and attach it to your 1040.
How much is the American Opportunity Credit Worth?
The credit amount is 100% for the first $2000 of education expenses that qualify that you paid for and 25% for the next $2,000 of educational expenses that qualify that you paid for. However, in the event that the credit brings down your taxes owed to zero, 40% of the remaining amount will be refunded to you as long as it does not exceed $1,000.
If you file your taxes using Turbo Tax, they make claiming the American Opportunity Credit easy. They ask you relevant questions and if you are eligible, they fill in the forms for you based on the information provide. Turbo Tax is your go to resource when you want to receive your largest refund ever.
Tax season can be a painful time for taxpayers. This is because they never know if they are going to have to pay the IRS money or get a much needed refund. If you have a job in the U.S. you are going to have to pay taxes. However, if you overpay, you will receive a refund back for your overpaid taxes.
The good news is with the upcoming 2015 tax refund calculator provided by TurboTax you do not have to wait until tax season comes along to know whether or not you are getting money back, you can find out during any time of the year.