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Education Tax Incentives

American Opportunity Tax Credit (AOC)

The American Opportunity Tax Credit (AOTC)

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
*Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. BancorpSouth Wealth Management is a trade name of BancorpSouth Bank, a division of Cadence Bank. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.

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