The American Opportunity Tax Credit (AOTC) is a credit given for qualified education costs that were paid for an eligible student throughout their first four years of higher education in the USA.
A maximum annual credit of 2,500 dollars is available for each qualified student.
You are entitled to a 40 percent return of any remaining credit funds (up to 1,000 dollars) if the credit reduces the amount of tax you owe to zero.
For each eligible student, you will receive a credit equal to 100 percent of the first 2,000 dollars in qualified education costs paid on their behalf, plus a further 25 percent of the subsequent 2,000 dollars in such costs.
Can a student under 24 claim the AOTC?
You cannot claim any portion of the American Opportunity Credit as a refundable credit on your tax return if you were under the age of 24 at the end of 2020 and any of the criteria mentioned below apply to you. Instead, you can only use the non-refundable portion of your allowable credit to lower your tax.
If you were a) under the age 18 at the end of 2020 or, b) 18 years old at the end of 2020 and your earnings covered only about half of your support or, c) over the age 18 and under the age 24 at the end of 2020 and a full-time student and your income covered less than half of your support, then you wouldn’t qualify for a refundable American Opportunity Credit.
Additionally, you wouldn’t qualify if you didn’t file a combined return for 2020 and at least one of your parents was still alive at the end of the year.
If you fail to meet these requirements, you would still be eligible to claim a part of your allowable American Opportunity Credit as a refundable credit.
However, you won’t qualify for receiving a part of your allowable American Opportunity Credit as a refundable credit if all the conditions listed below are true:
- You were under the age of 24 at the end of 2020
- You were at least 18 years old at the end of 2020
- You were a full-time student for 2020
- Your earnings were less than half your support
- Either of your parents were alive at the end of 2020
- You weren’t filing a joint return for 2020