American Opportunity Tax Credit Calculator

The American Opportunity Tax Credit is a tax credit that provides financial assistance to taxpayers paying for higher education expenses, such as tuition and textbooks. The AOTC offers significant financial assistance to taxpayers paying for higher education expenses. The tax credit can reduce the out-of-pocket costs of attending college or graduate school, making it easier for students and their families to afford the expense.

American Opportunity Tax Credit Calculator

How much is tax credit under American Opportunity Tax Credit?

The tax credit under AOTC is $2,500 per eligible student. The tax credit is allowed for qualified expenses incurred during the first four years of undergraduate and graduate studies. It varies with the Modified Adjusted Gross Income of the taxpayer because of phase out rule.

What is the American opportunity tax credit income limits?

The income requirements for the AOTC are based on the taxpayer’s modified adjusted gross income (MAGI).For the tax year 2023, taxpayers with a MAGI below between $80,000 and $90,000 (or $160,000 and $180,000 for married couples filing jointly). Taxpayers with a MAGI above these thresholds are not eligible for the credit.

What are American opportunity tax credit phaseout income limits for 2023 ?

For both the tax year 2022 and 2023, the phaseout income limits are as under :

• The Single taxpayer, American opportunity tax credit phaseout begins for Single taxpayers with a MAGI exceeding $80,000 and completely exhausts at $90,000 
• For married couples filing jointly) phaseout begins at $160,000 and ends completely at $180,000. 

Is American Opportunity Tax Credit refundable?

Unlike other tax credits and deductions, the AOTC is a partially refundable tax credit. It means even if you do not owe taxes, you may still be eligible to receive a portion of the credit as a refund.If the AOTC tax credit is more than the amount of tax you owe , you will get refund of 40 percent of the balance amount of the credit (up to $1,000).

Who is eligible for the AOTC tax Credit?

To be eligible for the AOTC, you must fulfill the following criteria:

• You must pay for qualified education expenses for your education, spouse, or dependent.
• You or the student for whom you claim credit must be enrolled at least half-time in a degree or certificate program at an eligible educational institution.
• The student must not have completed the first four years of post-secondary education before the relevant tax year.
• You must have income below a specified limit.(explained separately)

What are American opportunity tax credit qualified expenses?

The following expenses are considered qualified for the American opportunity tax credit claim.

1. Tuition fees charged by institutions
2. Enrollment fees charged by institutions
3. Cost of course materials, whether bought from Institutions or elsewhere

How to claim the AOTC American Opportunity Tax Credit

First, obtain a Form 1098-T, “Tuition Statement,” from the institution where the student is enrolled. This form will provide information about the amounts paid for qualified education expenses during the tax year.Then, complete Form 8863, “Education Credits,” and include it with your tax return. 

Can you claim Lifetime Learning Credit and also AOTC?

The answer is No. You cannot claim both. The credits -the AOTC and the Lifetime Learning Credit- are in the same tax year; therefore, you must choose the credit best suited to you in your existing circumstances.