American Opportunity Tax Credit

[sirjake]

I'm trying to do my taxes right now and have been confused as to whether or not I qualify for the American Opportunity Tax Credit. I think I just got clarification, based on the IRS's web site, and wanted to pass it along to others since it probably applies to many of us:

The web site is here:

Publication 970 (2010), Tax Benefits for Education

My question is about the "first four years" requirement of the American Opportunity Tax Credit. Since I finished my first degree in about 6 months, do I still qualify even though I've got a BA?

About midway down that page I think I found my answer:

Completion of first 4 years. A student who was awarded 4 years of academic credit for postsecondary work completed before 2010 has completed the first 4 years of postsecondary education. This student generally would not be an eligible student for purposes of the American opportunity credit.

Exception. Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education.

Thus, I think I still qualify. On my first degree, I only had 8 actual credits from classes that would qualify, the rest were proficiency exams. Thus, as far as the IRS is concerned, I'm still a freshman (I think), and I qualify. Weird, but I'll take it.

[vsantos316]

There was a response to this a similar tax question couple months ago. A couple posts explaning a little more ont his subject in December and January. Just search for american opportunity tax.
-Viv

I'm trying to do my taxes right now and have been confused as to whether or not I qualify for the American Opportunity Tax Credit. I think I just got clarification, based on the IRS's web site, and wanted to pass it along to others since it probably applies to many of us:

The web site is here:

Publication 970 (2010), Tax Benefits for Education

My question is about the "first four years" requirement of the American Opportunity Tax Credit. Since I finished my first degree in about 6 months, do I still qualify even though I've got a BA?

About midway down that page I think I found my answer:

Completion of first 4 years. A student who was awarded 4 years of academic credit for postsecondary work completed before 2010 has completed the first 4 years of postsecondary education. This student generally would not be an eligible student for purposes of the American opportunity credit.

Exception. Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education.

Thus, I think I still qualify. On my first degree, I only had 8 actual credits from classes that would qualify, the rest were proficiency exams. Thus, as far as the IRS is concerned, I'm still a freshman (I think), and I qualify. Weird, but I'll take it.

[Maniac Craniac]

The problem is, ironically but not surprisingly, tax officials and politicians don't really understand what they are talking about when it comes to education.

So, according to the WORDING of the tax code, you can use it for the first four years of college, but that does not count credit by exam, or for what is called "other recognized academic credential.". Following the wording of the code, one could test out of a Bachelor's and use the AOTC for a graduate degree, second bachelor's, etc.

However, the SPIRIT of the code seems to be that it is only for your first undergraduate degree and not to be used for anything beyond. Unfortunately, it is impossible to know for sure what way of thinking to follow. Nobody really knows what the heck the tax code is requiring of us at any point in time. Of course, it doesn't matter what you do, when the auditor comes he will tell you that you are wrong banghead

[sokhen]

Its not worth the audit. Your credits wouldn't count against you, but your degree disqualifies you there. Look for other deductions or credits.

[strawberrygreen]

I'm not sure what the correct answer is here, but here is the discussion on two other forums:

https://ttlc.intuit.com/questions/289791...in-2-years

Federal taxes: AOTC for graduate study?

Both of these discussions seem to conclude that you can take the AOTC after you have completed the BA if the BA was in less than 4 years and used in part credit by exam. I will say our TurboTax program concludes differently; it says if the BA is completed, then you don't qualify for further credits, regardless of how fast you did the BA. The TurboTax forums say the opposite. I don't know who is right.

[harrypotter]

Does anyone know if a student can get this credit refund if they meet all requirements & use federal financial aid to cover the cost of the 2 required courses at TESU + fees, without paying anything out of pocket? The IRS webpage for this deduction isn't very specific about that..

[dfrecore]

Does anyone know if a student can get this credit refund if they meet all requirements & use federal financial aid to cover the cost of the 2 required courses at TESU + fees, without paying anything out of pocket? The IRS webpage for this deduction isn't very specific about that..

This is a 9yo thread, you may want to search for something more updated.

[harrypotter]

Does anyone know if a student can get this credit refund if they meet all requirements & use federal financial aid to cover the cost of the 2 required courses at TESU + fees, without paying anything out of pocket? The IRS webpage for this deduction isn't very specific about that..

This is a 9yo thread, you may want to search for something more updated.

The IRS still offers this tax credit.. & very little has changed. Tried searching for an answer but couldn't find anything :/

https://www.irs.gov/credits-deductions/individuals/aotc

[harrypotter]

Any help would be greatly appreciated. Thank you.

[dfrecore]

I just searched Google, and it says that you can't claim a tax credit for anything you didn't pay. So if your tuition is $5000, but you get a Pell grant for $4000, then you could claim $1000. If your tuition is less than the Pell grant, then you can't claim the tax credit.

That's my understanding, but just search for "can I claim a tax credit if I get a Pell grant?"