1098-T Tuition Statement

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is a tax credit available to eligible students and their families to help cover qualified education expenses incurred during the first four years of higher education. It was introduced as part of the American Recovery and Reinvestment Act of 2009 and has been extended several times since.

Key features of the American Opportunity Tax Credit include:

1. **Eligibility Criteria:**

- Available to students pursuing a degree or other recognized education credential.

- Applies to the first four years of post-secondary education.

- Must be enrolled at least half-time for at least one academic period during the tax year.

- Income limits apply to claim the full credit; it phases out for higher income levels.

2. **Credit Amount:**

- The credit covers 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000 (for a total maximum credit of $2,500 per eligible student).

3. **Qualified Expenses:**

- Includes tuition, fees, and course materials required for the course of study.

- Some expenses, such as room and board, insurance, and transportation, do not qualify.

4. **Refundable Credit:**

- Up to 40% of the credit (up to $1,000) is refundable, meaning that even if the tax liability is zero, the taxpayer may receive up to $1,000 as a refund.

5. **Limitations:**

- The credit is subject to income phase-outs, meaning it gradually reduces for taxpayers with a modified adjusted gross income (MAGI) above certain thresholds.

- It cannot be claimed by married individuals filing separately.

- The student must not have any felony drug convictions.

The AOTC is a significant tax benefit for many students and families, helping to offset the costs of higher education. It's important to carefully review the eligibility criteria and ensure that all qualified education expenses are properly documented when claiming this credit on tax returns.


1098-T Frequently Asked Questions