Introduction
The American Opportunity Credit (AOC) is a valuable education tax credit that helps students and
parents reduce the cost of higher education. Under IRC § 25A, eligible taxpayers can claim up to
$2,500 per student for qualified tuition and expenses.
Many taxpayers miss out on this credit due to eligibility restrictions and filing errors. This guide
explains who qualifies, how to claim it, and how much you can save in 2025.
Who Qualifies for the American Opportunity Credit?
To be eligible for the AOC, you must meet the following criteria:
- Â Be enrolled at least half-time in a degree or certificate program.
- Â Be in the first four years of postsecondary education.
- Â Not have claimed the AOC for more than four years.
- Â Not have a felony drug conviction.
- Â Meet income limits (see below).
2025 Income Limits for the AOC
| Filing Status | Full Credit Available | Partial Credit (Phase-Out Begins) | No Credit |
|---|---|---|---|
| Single | Up to $80,000 | $80,001 – $90,000 | Above $90,000 |
| Married Filing Jointly | Up to $160,000 | $160,001 – $180,000 | Above $180,000 |
Note: Taxpayers filing as Married Filing Separately do not qualify for this credit.
How Much Is the American Opportunity Credit Worth?
- Â Maximum credit: $2,500 per eligible student
- Â 100% of the first $2,000 in qualified expenses
- Â 25% of the next $2,000 in expenses
- Refundable portion: Up to 40% ($1,000 max refund)
What Expenses Qualify for the AOC?
Eligible Expenses
- Â Tuition and fees paid to an accredited institution
- Â Required books, supplies, and equipment
- Â Course-related expenses
Non-Eligible Expenses
- Â Room and board
- Â Transportation costs
- Â Student loan interest
- Â Medical insurance
How to Claim the American Opportunity Credit
Step 1: Gather Required Documents
- Â Form 1098-T (Tuition Statement from school)
- Â Receipts for books and course materials
Step 2: Complete IRS Forms
-  Form 8863 – Education Credits
-  Form 1040, Line 29 – Report the credit amount
Step 3: File Your Tax Return
- Â If your tax liability is zero, up to $1,000 of the AOC is refundable.
IRS Forms & Compliance Checklist
-  Form 1040 – Main tax return
-  Form 8863 – Claim the AOC
- Form 1098-T – Tuition statement
Conclusion
The American Opportunity Credit (AOC) helps students and families offset higher education costs
by reducing tax liability and increasing refunds. Ensure you meet income limits, file the correct
forms, and claim the maximum benefit.
For expert tax assistance, schedule a consultation with Anshul Goyal, CPA EA FCA, a licensed tax
professional and IRS representative.
Frequently Asked Questions (FAQs)
1. Can graduate students claim the AOC?
No, the AOC is only for undergraduate students in their first four
2. Can I claim the AOC if I pay tuition with student loans?
Yes, as long as you are legally responsible for the loan.
3. Can I claim the AOC if I am a dependent?
No, only the taxpayer who claims the student as a dependent can claim the credit.
4. Can I claim both the AOC and the Lifetime Learning Credit?
No, you must choose one per student per year.
5. Is the AOC available if I take the standard deduction?
Yes, the AOC is available whether you itemize or take the standard deduction.
About Our CPA
Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant and an IRS Enrolled Agent (EA).
He specializes in education tax credits, IRS compliance, and tax-saving strategies.
Schedule a consultation today with Anshul Goyal, CPA, to maximize your tax benefits.