The American Opportunity Tax Credit (AOTC) is a credit for qualified educational expenditures paid to an eligible student in the first four years of his or her college education.
Eligible candidates are students seeking a degree or other recognised educational certificate, students who have enrolled for at least half of an academic period beginning in the tax year, and students who have not completed the first four years of higher education at the beginning of the tax year.
Other eligible candidates are students who have not used the AOTC or the former Hope credit for more than four tax years, and those who have not been convicted of drug offences at the end of the tax year.
Anyone trying to claim the AOTC is advised to be careful with the procedure, as incorrect information means that they will have to pay back the amount of AOTC they have received in error with interest.
Unlike other tax credits for higher institutions, the AOTC’s qualifying expenditures cover books and supply fees.
AOTC is also a refundable tax credit, meaning that if an individual credit reduces his/her tax to a balance of zero or less, they can receive an income tax refund of some of the money up to $1,000.
Once a tax filer’s modified adjusted gross income exceeds $90,000 as a solo soldier or $180,000 for joint filing of marriage applications, the AOTC cannot be invoked.
The sources for this piece include an article in ZDNet.