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American Opportunity Credit


The American Opportunity Credit is a credit for post-secondary costs applied to decrease the taxes owed by a student, their spouse, and/or a dependent.  The credit is designed to help qualifying low to moderate income persons cover the significant fees related to post-secondary education. 

The university or educational institution will provide the student with a Form 1098-T listing potentially applicable education expenses.

Qualifying Students

Qualifying Institutions:

Qualifying Claimants:

The credit is calculated per student; a single taxpayer can claim the AOC for more than one qualifying student.

General Rules:


Costs are included, even if the student had to borrow the funds or take out a loan to finance their studies.

The credit should be claimed on the tax return the year the costs are incurred, not when any borrowings or loans are paid off.

Applicable Costs


Those qualifying costs paid for in that were paid for in the tax year (and the first three months of the following year if paid for in the tax year). 

[This includes a course paid for in 2022 but where the class started between January – March]

Costs:  Tuition, Textbooks, and Certain Expenses required by the institution for registration / attendance. 

If used, but not required by the institution, it may not qualify as an applicable cost.  The fact that the resources was purchased directly from the institution (e.g., at the bookstore) does not automatically make it an applicable cost.


Time Limit:

Non-Qualifying Costs:

These do not qualify as acceptable costs, even if they are required by the institution for registration/attendance.

Expenses Paid for with Scholarships, Grants, or Employer-Assistance:

When expenses are covered with tax-free scholarships, grants, or employer-assistance, the taxpayer cannot claim those costs for the American Opportunity Credit.


Expenses can only be claimed once on the tax return. If they are claimed elsewhere on the return (e.g., under a tax free distribution from an education savings plan), the taxpayer cannot claim those costs for the American Opportunity Credit.

The same is true of the Lifetime Learning Credit – it cannot be claimed for the same student as the American Opportunity Credit.

Refunded Costs

Refunded costs are not qualifying expenses. If the refund arrives after the taxpayer’s return has been filed, they may need to pay part of their education credit back to the IRS.

Modified Adjusted Gross Income (MAGI) Limits

The credit a taxpayer is allowed to claim will begin to decline when their MAGI hits $80,000 (Single) | $160,000 (MFJ). 

The taxpayer cannot claim the AOC if their MAGI is $90,000+ (Single, HoH, QW) | $180,000+ (MFJ).

Unclaimed Refundable Credit

The student cannot claim the refundable part of the AOC if the following applies:


Maximum Applicable Costs: $4,000

Maximum Possible Credit = $2,500

Once calculated, the credit will be divided into a Refundable (40%) and Non-Refundable (60%) portion.

Maximum Refundable Credit = $1,000
Maximum Non-Refundable Credit = $1,500

The refundable portion can be applied to offset the taxpayers’ AMT.

On taxpayers with MAGI of less than $90,000 (Single) | $180,000 (MFJ) will be allowed to claim the AOC.

It will also begin to decline when the taxpayer’s MAGI reaches $80,000 (Single) | $160,000 (MFJ) until it reaches $0.00.


Form 8863 – Education Credits
Form 1098-T – Tuition Statement
Form 1098-E – Student Loan Interest Statement
Form 5498-ESA – Coverdell ESA Contribution
Form 1099-Q – Payments from Qualified Education Program


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