As we enter the heart of tax season, many parents of college students are looking forward to reaping the rewards of all of the college tuition checks they’ve been writing recently: an education tax break!
American Opportunity Credit
As we recently wrote on our blog, the most valuable education tax break for most parents of college students is the American Opportunity Credit (AOC). You may be eligible to take this credit if you are paying the tuition and required enrollment fees of a dependent child in first 4 years of his or her undergraduate education, attending at least half-time. The AOC provides a credit equaling 100% of the first $2,000 of qualified expenses paid and 25% of the next $2,000. That means that parents paying at least $4,000 in qualified colleges expenses may be able to claim the maximum $2,500 AOC. Taxpayers with modified Adjusted Gross Incomes (mAGIs) less than $80,000 (single) or $160,000 (joint) can claim the full credit, while taxpayers with mAGIs up to $90,000 (single) or $180,000 (joint) may be eligible for a reduced credit. Forty percent of the credit is refundable.