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Life Planning Center > Paying For College
Education Tax Incentives
  • American Opportunity Tax Credit (AOC)
  • The Lifetime Learning Credit
  • Deduction for Student Loan Interest

American Opportunity Tax Credit (AOC)

The American Opportunity Tax Credit (AOTC)

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The American Opportunity Tax Credit (AOTC) allows taxpayers to save money on their taxes if they paid higher education expenses for themselves, a spouse, or a dependent. The credit is worth up to $2,500 per student but only for their first four years of higher education. If you paid education expenses for multiple people, such as for two dependents, you can deduct up to $2,500 for each person. Your exact credit amount is calculated as the 100% of your first $2,000 of qualified expenses, and then 25% of your next $2,000 of eligible expenses. You need to have at least $4,000 of expenses per person in order to qualify for the maximum credit.

Qualifying expenses include tuition, fees you are required to pay in order to enroll in a course or program, books and classroom supplies and equipment.

Only a student’s first four years of higher education are eligible for the AOTC. This is typically just enough for an undergraduate degree and so graduate students don’t qualify unless their undergraduate degree took fewer than four years to complete. You don’t need to complete all four years consecutively, but a taxpayer can only claim the credit on four separate income tax returns. (The four-year limit includes any years you claimed the Hope credit, a previous version of the AOTC)

 

2020 AOTC Income limits

FILING STATUS MAXIMUM INCOME FOR FULL CREDIT MAXIMUM INCOME FOR PARTIAL CREDIT
Single $80,000 $90,000
Head of household $80,000 $90,000
Married, filing jointly $160,000 $180,000
Married, filing separately $80,000 $90,000
Qualified widow(er) $80,000 $90,000
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Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Franklin Mint Federal Credit Union and Mint Wealth Advisors are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Mint Wealth Advisors, and may also be employees of Franklin Mint Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Franklin Mint Federal Credit Union or Mint Wealth Advisors. Securities and insurance offered through LPL or its affiliates are:

Not Insured by NCUA or Any Other Government Agency Not Credit Union Guaranteed Not Credit Union Deposits or Obligations May Lose Value

*The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: NJ, PA, NY, DE, AZ, MI, FL, MD, TX, VA, GA, NC.



Financial Learning Center content created by TrueBridge, Inc. The information provided is based upon sources and data believed to be accurate and reliable. The content contained herein is intended for information and illustrative purposes only, should not in any way be construed as a personal recommendation, and should be used in conjunction with individual professional advice.

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