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American Opportunity Frequently Asked Questions

The American Opportunity Credit is a federal income tax credit for qualified tuition and expenses of eligible post-secondary schools. The scholarship is available on a per student basis, for each student listed as an exemption on the taxpayer’s federal income tax return (i.e., the taxpayer, the taxpayer’s spouse, and eligible dependents), who was enrolled at least part time in a certificate or degree program in for the calendar year.

What is an “eligible dependent”?
A taxpayer may claim a dependency exemption for his/her unmarried child if:
1) the taxpayer supplies more than half of the child’s support for the taxable year, and
2) the child is under age 19 or a full-time student under age 24.

How much credit can a taxpayer claim?
The credit amount claimed is equal to 100% of the first $2,000 spent on qualified tuition and expenses, plus 25% of the next $2,000 of qualified tuition and expenses, to a maximum of $2,500. 40% Of the American Opportunity credit is refundable for most taxpayers.

How does taxpayer income level affect the American Opportunity Credit Scholarship?
The American Opportunity Credit scholarship is gradually reduced for taxpayers who have modified gross income of $80,000 to $90,000, ($160,000 to $180,000 if filing jointly). The scholarship credit is not available to taxpayers with MAGI of more than $90,000, or $180,000 if filing jointly.

What is Modified Adjusted Gross Income?
MAGI is a taxpayer’s adjusted gross income plus any amount excluded from gross income under Sections 911, 931, or 933. These sections of the tax code pertain to income earned abroad, including Puerto Rico.

How does a taxpayer claim the American Opportunity Credit Scholarship?
To claim the American Opportunity Credit Scholarship, a taxpayer must file IRS Form 8863 with their federal income tax return.