The American opportunity credit is an education credit available to students only for the first 4 years of postsecondary education. It will be 100% of the first $2,000 of qualified education expenses per student plus 25% of the next $2,000 of qualified education expenses for that student. The maximum allowed credit is $2,500 per eligible student per year. 40% of the credit is refundable. The modified adjusted gross income (MAGI) limit for claiming the AOTC is $90,000 or more ($180,000 or more in the case of a joint return). The modified adjusted gross income in excess of $80,000 ($160,000 in the case of a joint return) reduces the credit.
Who Does Not Qualify for the Refundable American Opportunity Credit?
If the taxpayer was under age 24 at the end of the tax year and the conditions listed below apply to him, he cannot claim any part of the American opportunity credit as a refundable credit on his tax return. He is only allowed to claim the nonrefundable credit to reduce his tax.
The taxpayer does not qualify for the refundable American opportunity credit if all three of the following conditions apply:
The taxpayer was under age 18 at the end of the tax year, or age 18 with earned income of less than one-half his support, or a full-time student age 19-23 whose earned income was less than half of his support;
The taxpayer has at least one living parent at the end of the tax year; and
The taxpayer is not filing a joint return for the tax year.