The American Opportunity Tax Credit

Help defray the cost of college

Are you the parent of children in college? Do you want to save on taxes? Then this hub has been written with you in mind. If your adjusted gross income is less than 160,000 dollars married or 80,000 dollars single you as a United States taxpayer would be well served by taking advantage of the American Opportunity Tax Credit. Even if your income exceeds those amounts listed please read on.

What does this credit do for you? Assuming your student is a dependent (which may include yourself) you may take the first 2000 dollars of tuition and required course materials as a full tax credit. The second 2000 dollars is taken at a 25 percent tax credit, meaning you may receive a 2500 dollar tax credit for the first 4000 dollars of tuition and course related materials. College is not cheap these days and 2500 dollars will go a long way towards paying for school.

To qualify the student must be enrolled at least a half time student as defined by the institution of higher learning.

Most colleges tuition bills in the United States are going to exceed 4000 dollars however if they do not you may deduct required course materials which includes textbooks, software and perhaps even a computer. You will defiantly want to keep your receipts as with all tax issues. .

The American Opportunity Tax Credit

Look for every honest deduction

If your income is near or above the upper limits investigate the following to reduce your adjusted gross income.

Contributions to your 401K or 403B will reduce your adjusted gross income. You may contribute up to 16,500 dollars unless you are over 50. Over the age of 50 you allowed to contribute 22,000 dollars. Two working spouses over 50 can contribute a handsome 44,000 dollars.

Contribute the maximum to you health savings account. The maximum per employee is 6150 dollars or 7150 dollars for those over the age of 55.

Other expenses to reduce your adjusted gross income include but are not limited to:


Penalties on early withdrawal of saving

Student loan interest

Some business expenses

Contributions to a traditional IRA

The United States tax code is very complex. Not every deduction is listed here.

Take some time to investigate other methods to reduce your adjusted gross income as they may apply to you. The American Opportunity Tax Credit is a good deal for those who qualify. Don’t pass it up.

Comments 5 comments

Susan Carter profile image

Susan Carter 6 years ago

Thanks for the advice. My daughter is past the dependent age so I can't help her this way while she's in college, but please keep passing on any more advice you have to help parents assist their kids.

Sandyspider profile image

Sandyspider 6 years ago from Wisconsin, USA

Thanks for the advice.

mulberry1 profile image

mulberry1 6 years ago

All advice on how to reduce some of these expenses and help with taxes is great. Thanks for sharing.

Bob 4 years ago

Can military personal who receive the Illinois veterans grant (TA paid for full) and MGIB get this?

Nobody on my campus knows this answer.

Daddy Paul profile image

Daddy Paul 4 years ago from Michigan Author


You really need a tax expert.

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