If the student already has a four-year degree, however, he or she can’t qualify for the tax credit. The four years do not have to be consecutive. You can claim the American Opportunity Tax Credit on one student for up to four years. If you’re claiming the credit on one or more dependent students, be sure to keep good records for each student so you can show how you spent your $4,000 if needed. your medical insurance even if it’s billed through your school.your parking pass or any other transportation expenses.your dining plan or other money spent on food and entertainment.your dorm room or other living arrangements.You may need to prove the school required you to purchase the supplies, though, which is important to remember if you’re buying an iPad, a laptop, or some other expensive gear. Yes, the IRS considers books, technology, and other supplies qualifying expenses covered by the tax credit. Does the Credit Cover Books and Supplies? Different schools define a full-time load differently, so check with the registrar’s office if you have questions. The student must also be attending school at least half-time during the year. To be certain, though, you can search for your school in this database. If the university you’re paying sends you an IRS 1098-T form in January, chances are you meet the school and degree qualifications. To claim the credit, the money you’re spending must be going toward a degree at a qualifying, accredited institution. Kind of complicated, right? But, unfortunately, with the rising cost of higher education, spending $4,000 shouldn’t be hard to do. If you spent only $3,500 on qualifying expenses, you could claim only $2,000 worth of the tax credit because you didn’t spend that second $2,000. Here’s why: the tax code says the credit covers 100 percent of the first $2,000 you spend and 25 percent of the second $2,000.Īltogether this equals $2,500, but only if you spend enough to reach the threshold. To claim the full $2,500 you’d have to spend at least $4,000 on qualifying expenses. There’s a lot more to consider, including: How Much Do You Have to Spend? Of course, meeting the income requirement just keeps you in the conversation. However, students who are dependents on someone else’s tax return cannot claim the credit for themselves. Or, if you’re a student, you may be able to claim the credit on yourself. If you met these income requirements, you could get the tax credit on any of your dependents who meet the additional requirements we’re about to discuss. You can still qualify for part of the credit if you earned up to $90,000 as an individual or $180,000 as a family in 2018.Families filing jointly could have earned up to $160,000 in 2018 and still qualify for the full credit.Individuals who earned up to $80,000 in 2018 could qualify for the full credit.Like most tax credits, your income will help determine your eligibility for the American Opportunity Tax Credit, so let’s look at those simple numbers first. Who’s Eligible for the American Opportunity Tax Credit? So let’s take a close look and try to get at the nuances of this tax credit. ![]() Now, like anything else the Internal Revenue Service administers, the American Opportunity Tax Credit (AOTC) can be hard to understand. With this tax credit, which got its start during the Great Recession, you could claim $2,500 per student in the form of a tax credit when you file. Enter the American Opportunity Tax Creditįortunately for many parents, Uncle Sam can help through the American Opportunity Tax Credit which has been renewed for the 2019 tax season (2018 tax year). 4 MUSTS Your Next Student Loan (Ask a CFP®)Įven a state school with more manageable tuition could also require thousands of dollars worth of books, supplies, and technology fees per student.Īnd all these expenses come at a time when many of us need to be thinking more about retirement.
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