The American Opportunity Tax Credit can be claimed for expenses for the first four years of post-secondary education. It is a tax credit of up to $2,500 of the cost of qualified tuition and related expenses paid during the taxable year. Of the total credit amount, 40%, a maximum of $1000, is refundable. The remaining 60% in nonrefundable.

The terms "qualified tuition" and "related expenses" include expenditures for course materials such as books, supplies and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. The credit does not cover room, board, transportation, or medical insurance.

In tax year 2023, the credit begins to phase out for individuals whose modified adjusted gross income is between $80,000 and $90,000, or between $160,000 and $180,000 for joint filers. The credit is phased out for taxpayers with incomes above these levels.

The credit is claimed using Form 8863 Education Credits (American Opportunity and Lifetime Learning Credits).

To enter this information in the TaxAct program, go to our Student Worksheet Entries FAQ.

TaxAct will generally determine which education benefit is most advantageous for your Federal return based on the data entered on your return, such as income, filing status, amount of qualified expenses, etc.

You can review or modify the tax treatment of the education expenses. To see how the refund or amount owed may change when you change the selection between the American Opportunity Credit and the Lifetime Learning Credit, follow the steps below:

1. From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click in the top left corner of your screen, then click Federal).
2. Click the Education dropdown, then click Education credit summary.
3. On the screen titled Higher Education - Summary, click the Click here link at the bottom of the list if you want to change the selected education benefit.

You can obtain additional information on this credit and how it affects college expenses reported on your tax return at the IRS American Opportunity Credit: Questions & Answers website.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.