Is someone in your household pursuing higher education? Good for you! If you, your spouse, or your dependent child incurs expenses related to higher education, then you could be eligible for the American Opportunity Tax Credit (AOTC).
The AOTC is available to anyone pursuing a degree, who is enrolled at least half time, has not finished the first four years of higher education, has not claimed the AOTC for more than four years, and does not have a felony drug conviction. 1098-Ts will be sent out to all people who may be eligible.
The amount of the credit is 100% of the first $2,000 in qualified expenses and then 25% of the next $2,000 of expenses. This means it caps out at $2,500. This limit is per student, not per tax return. It is a partially refundable credit. This means that $1,000 of the credit can be refunded to you even if your tax liability is zero. Qualified expenses include tuition, fees, books, supplies, and equipment. Room and board do not count for the AOTC. Also, any costs paid for with grants or scholarships do not count.
There are income limits for the AOTC. Those making $80,000 or less can receive up to $2,500. It phases out between $80,000 and $90,000. Once you make $90,000, you no longer qualify for the credit. If you are married and filing jointly, these income limits double.
Make sure to let your tax preparer know if you or anyone else included on your tax return is pursuing higher education and keep track of all your receipts. This is a great tax credit to take advantage of!
Jennifer Thonert
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