American opportunity credit how many years

Our opinions are our own. Here is a list of our partners and here's how we make money. If you paid for college in the last year, you may be able to claim the American opportunity credit or lifetime learning credit, or the the tuition and fees deduction. The American opportunity credit is generally the most valuable education tax credit, if you qualify. You can claim these education tax credits and deductions even if you paid for school with a student loan.

Parents can take advantage, too, so long as they don't choose a married filing separately status. Here's what to know about each option. Who can claim it: The American opportunity credit is specifically for undergraduate college students and their parents. You can claim the credit on your taxes for a maximum of four years. Is the American opportunity credit refundable? It also differs from the Hope scholarship credit because it allows the credit to be claimed for four years of post-secondary education instead of two.

This means you can get it even if you owe no tax. In general, qualified expenses for the education tax credits include tuition and required fees for the enrollment or attendance at an eligible post-secondary educational institution. To be creditable, the expenses paid during a taxable year must relate to: 1 an academic period that begins in the same taxable year; or 2 an academic period that begins in the first three months of the following taxable year.

For the American opportunity tax credit, qualified expenses have been expanded to include expenditures for course materials, as well as tuition and required fees. For this purpose, the term "course materials" means books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.

The student should receive a Form T from the educational institution that the student attended. If the student does not receive a Form T, the student should contact the educational institution and request the form. Whether an expenditure for a computer qualifies for the credit depends on the facts. An expenditure for a computer would qualify for the credit if the computer is needed as a condition of enrollment or attendance at the educational institution.

You will be able to reduce your tax liability by one dollar for each dollar of credit for which you're eligible. It is the taxpayer's adjusted gross income increased by foreign income that was excluded, and by income excluded from sources in Puerto Rico or certain U. You cannot claim the tuition and fees tax deduction in the same taxable year that you claim the American opportunity tax credit or the Lifetime Learning credit.

You must choose between taking an education tax credit or taking the deduction for tuition and fees. You also cannot claim the tuition and fees tax deduction if anyone else claims the American opportunity tax credit or the Lifetime Learning credit for you in the same taxable year. Although the credit will usually result in greater tax savings, taxpayers should calculate both the tax credit and the deduction on the tax return to see which is most beneficial.

Often, tax software will automatically compare the tax result, from taking the education credit or taking the deduction, for you. Educational institutions are required to file a Form T, Tuition Statement PDF , with the IRS and to provide a copy of the form to the student, for each enrolled student for whom there is a reportable transaction.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. The average cost of undergraduate tuition at a public four-year college rose 3.

If you qualify for it, the AOTC is one way to reduce your taxes and possibly get a refund. Make sure to run the numbers and see which education tax credits or deductions make the most sense for your situation. She has more than a dozen years of experience in tax, accounting and business operations.

Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years.

You can find her on LinkedIn. In a Nutshell College is costly. Advertiser Disclosure We think it's important for you to understand how we make money.