How the American Opportunity Tax Credit works
The AOTC equals 100% of the first $2,000 in qualified education expenses, plus 25% of the next $2,000.
For example, if you paid $4,000 in qualifying expenses for your child’s freshman year, the credit would be:
- $2,000 for the first $2,000
- $500 for the next $2,000
- $2,500 total credit
For most taxpayers, 40% of the credit, up to $1,000, may be refundable.
Who qualifies for the AOTC
The student generally must:
- Be pursuing a degree, certificate, or other recognized credential.
- Be enrolled at least half-time for at least one academic period.
- Not have completed the first four years of postsecondary education before the tax year began.
- Have had the AOTC or former Hope Credit claimed for fewer than four previous tax years.
- Not have a felony drug conviction as of the end of the tax year.
Note: You also can’t claim the credit if you file married filing separately or if someone else claims you as a dependent. However, the person(s) that claimed you as a dependent may be able to take the AOTC credit.
AOTC income limits for tax years 2025 and 2026
Your modified adjusted gross income (MAGI) and filing status determine whether you can claim the full American Opportunity Tax Credit, a reduced amount, or no credit. The income limits are the same for tax years 2025 and 2026.
| Filing status | Full credit | Partial credit | No credit |
|---|---|---|---|
| Single, head of household or qualifying surviving spouse | $80,000 or less | $80,000 to $90,000 | $90,000 or more |
| Married filing jointly | $160,000 or less | $160,000 to $180,000 | $180,000 or more |
Source: Internal Revenue Service
What expenses qualify
Qualifying expenses include:
- Tuition
- Required enrollment fees
- Course materials, including books, supplies, and equipment needed for a course of study, whether or not you buy them from the school
Expenses that typically don’t qualify include:
- Room and board
- Transportation
- Insurance
- Medical expenses
- Costs covered by tax-free scholarships or grants
AOTC vs. Lifetime Learning Credit
The Lifetime Learning Credit (LLC) is another education tax credit that may be an option if the student doesn’t qualify for the AOTC. For example, if they’re in a graduate program. It offers up to $2,000 per return, is nonrefundable, and is available for an unlimited number of years. You can’t claim both credits for the same student and the same expenses in one year.
How to claim the American Opportunity Tax Credit
You generally need Form 1098-T and records of what you paid. Complete Form 8863 and attach it to Form 1040. The filer and student must have taxpayer identification numbers by the return due date, and Form 8863 requires the school’s employer identification number.
Once you’ve gathered the right forms and records, you’re ready to file and claim any education credits you qualify for.
