What Is the American Opportunity Tax Credit?

The American Opportunity Tax Credit (AOTC) is a tax credit worth up to $2,500 per eligible student per year for the first four years of higher education — 100% of the first $2,000 in qualified expenses and 25% of the next $2,000. Qualified expenses include tuition, fees, and required course materials such as books and supplies. The credit is partially refundable — up to 40% (a maximum of $1,000) can be refunded to you even if you owe no income tax. To claim the credit, the student must be enrolled at least half-time in a program leading to a degree or certificate. The credit phases out for single filers with MAGI between $80,000 and $90,000, and for married filers between $160,000 and $180,000. The AOTC is generally more valuable than the Lifetime Learning Credit for eligible undergraduates, but you can only claim it for four tax years per student.