American Opportunity Tax Credit Refund – AOTC Eligibility and How to claim?

The federal government provides an American Opportunity tax credit to make higher education affordable for students. Eligible taxpaying parents and students can claim the AOTC refunds when they file tax returns. The article covers everything you wish to know about your AOTC refunds.

American Opportunity Tax Credit Refund

The IRS provides the American Opportunity Tax credit to eligible students for qualified educational expenses during the first four years of higher education in the US. 

The government provides the maximum annual credit to each eligible student up to $2,500. The credit allows dependent students to cover their higher educational expenses. The expenses include tuition fees, course materials, equipment, etc. paid during the tax year you filed. 

The AOTC does not cover higher education expenses including transportation, medical insurance, and accommodation.

WA Student Assistance Payment Program

Centrelink’s one-off payment

Moreover, if the AOTC credits bring the tax you owe to zero, the credit is refundable, meaning you get back the money as a refund from the agency when you don’t have any liability to pay the tax.

Eligibility for the American Opportunity Tax Credit

The taxpaying student and parents qualify for the AOTC credits when they meet the following requirements of the IRS:

  • Students who have enrolled in a degree course or some other educational qualification.
  • Students who have enrolled for at least one academic period at the beginning of the tax year.
  • Students who are yet to complete their first four years of higher education in the tax year.
  • Students who have not claimed the former Hope credit or AOTC from four tax years or more. 
  • Students should not be involved in any drug conviction at the end of the tax year you filed the return.

Income Limit: 

The Modified Adjusted Gross Income (MAGI)  limit for the AOTC claimants to receive the full AOTC credits ranges from $80,000 or less for single filers and $160,000 or less for joint filers. Here’s the distribution of income limit for the claimants:

Credit  Individual  Joint Filers
Full credit  $80,000 or less $160,000 or less
Partial credit  Above $80,000 but less than $90,000 Above $160,000 but less than $180,000

American Opportunity Tax Credit Refund

There is no credit for the claimants exceeding the income limit of $90,000 (individuals) and $180,000 (Join Filers).

How much you can get in AOTC refunds?

As mentioned earlier, the eligible AOTC claimants can expect a maximum credit of up to $25,00 per student. The rule for distributing the AOTC credits to the eligible claimants is as follows:

  • The claimant would receive 100% credit on the first $2000 qualified education expenses paid on each student in the year.
  • You would receive 25% of the next $2000 educational expenses you paid in the tax year on students. 
  • Now, when you are not liable to pay tax due to AOTC credits you are eligible for 40% of the AOTC refunds on your tax returns, that is, up to $1000.

Remember, you can only claim the AOTC refunds when you meet the requirement of income limit for the AOTC credits. 

When can I expect my AOTC refunds?

The taxpayers who have filed the tax returns will receive their AOTC credits within 21 days of filing their tax return through direct deposit. 

The tax filers who have filed the tax returns for 2023 before the 15 April 2024 tax deadline and are eligible for the AOTC credits can expect their AOTC refunds in the coming 21 days. 

So, if you have applied for a tax extension and are eligible for the AOTC credits, you must claim the AOTC credits while you file your tax returns. 

How to claim the AOTC Refunds?

Taxpayers who have applied for the extension can claim the AOTC credits in the following ways:

  • The eligible students would receive the IRS 1098-T from an eligible school or college to claim the AOTC credits along with a tuition statement by January 31.
  • The statement will help you in calculating your AOTC credit, so make sure it is correct and if you do not receive such a Form contact your school.
  • The applicants need to submit this form with Form 1040 while they file their tax return to receive the AOTC refunds. 
  • Next, you must fill the Form 8863 and attach the form with your income tax return Form 1040. 

The American Opportunity Tax credits offer you support for completing your higher education and achieving your career goals, so eligible dependent students, taxpaying students, or parents must utilize this tax credit. 

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