American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit (AOTC) provides valuable tax relief for families paying for higher education. It applies to qualified education expenses for an eligible student’s first four years of post-secondary education.

Maximum Credit

• Up to $2,500 per eligible student, per year.

How It Works

• 100% of the first $2,000 in qualified education expenses

• 25% of the next $2,000 in expenses

  • Example: If you pay $4,000 in qualified expenses, you can receive the full $2,500 credit.

Refundability

• If the credit reduces your tax liability to zero, 40% of the remaining amount (up to $1,000) may be refunded to you — even if you owe no tax.

Eligible Expenses include tuition, fees, and course materials required for enrollment or attendance.

Important Notes:

• The student must be pursuing a degree or recognized credential.

• Must be enrolled at least half-time for at least one academic period beginning in the tax year.

• Income limits apply and phase out the credit at higher income levels.