For approved educational expenses incurred during the first four years of higher education in the US, eligible students can receive the American Opportunity Tax credit from the IRS. Every qualifying student receives the maximum annual credit from the government, which is $2,500.
Students who are dependents can use the credit to pay for their higher education costs. Tuition, course materials, equipment, and other costs paid during the tax year you filed are included in the expenses. The AOTC does not pay for living expenses, health insurance, or transportation costs associated with a higher education.
Eligibility for the American Opportunity Tax Credit
1. Individuals who have signed up for a degree program or another type of training.
2. Students who, at the start of the tax year, had been enrolled for a minimum of one academic term.
3. Individuals who did not finish their first four years of college within the tax year.
4.Students who, for four or more tax years, have not claimed the AOTC or the former Hope credit.
5. At the conclusion of the tax year in which you filed the return, there shouldn’t be any drug convictions involving students.
Income Cap:
For AOTC claimants to be eligible for the full amount of credits, they must meet the Modified Adjusted Gross Income (MAGI) threshold, which is $80,000 or less for single filers and $160,000 or less for joint filers.
How much you can get in AOTC refunds?
1. For every student in the claimant’s cohort, the first $2000 in qualifying education expenses paid during the year would be fully credited.
2. Of the following $2000 in educational expenses you spend throughout the tax year on students, you would earn 25%.
3. You can now claim 40% of the AOTC refunds on your tax returns, up to $1000, if you are not required to pay tax because of AOTC credits.
4. Recall that you are only eligible for AOTC refunds if you fulfill the income threshold criterion for AOTC credits.
How to claim the AOTC Refunds?
1. By January 31, the qualified students would get a tuition statement and an IRS 1098-T from an approved institution or school to claim the AOTC credits.
2. Make sure the statement is accurate because it will be used to calculate your AOTC credit. If you do not receive one of these forms, get in touch with your institution.
3. To be eligible for the AOTC refunds, the applicants must file Form 1040 together with this form with their tax return.
4. The Form 8863 must then be completed and attached to your Form 1040 income tax return.
In order to support themselves and their dependents in finishing their higher education and reaching their professional objectives, qualified parents, paying students, and dependent students must take use of the American Opportunity Tax credits.
