The federal government offers eligible citizens the American Opportunity Tax Credit (AOTC) to help students cover the cost of higher education. The AOTC aims to reduce the burden from low and middle income families and allows individuals to pursue higher education. Individuals who have filed income tax returns for the previous year will receive the tax credits. The previous year’s annual income is a determining factor for the AOTC and it decides particular benefit amounts for the citizens accordingly. The Opportunity Tax Credit helps in reducing the education cost for individuals and supports low income couples.
American Opportunity Tax Credit 2024
Due to higher inflation rates and cost of living payments, the federal government observed that several low and middle income students opt out of higher education to start a full time job. However, the federal programs help to cover the cost incurred in pursuing higher education. Couples can file jointly to avail of the American Opportunity Tax Credit for their eligible children. The number of children a couple has will not affect the amount of tax credit benefits. The Internal Revenue Service provides benefits for each child to a couple and it does not reduce the benefit amount for any of the child. In case a couple who is claiming the benefits has any tax liability and has not cleared the dues before the previous financial year ends, they will not qualify for the opportunity tax credits.
An individual can claim up to four academic sessions. In case the claimant has already completed his or her higher education, he or she will not be allowed for the tax credit benefits. In case they are currently pursuing their higher education and have years left to finish, they will get the credit amount for the remaining years. Couples should make sure that they have updated tax filing documents. If individuals are found availing of the payment with outdated documents and breach income rules, the IRS will direct such couples or claimants to return the benefits.
American Opportunity Tax Credit 2024 Quick Overview
| Title | American Opportunity Tax Credit 2024 |
| Concerned Department | The Internal Revenue Service |
| Country Name | The USA |
| Category | Federal Education Program |
| Payment Schedule | September 2024 |
| AOTC Amount | $2500 |
| Official Website | www.irs.gov |
American Opportunity Tax Credit Annual Income Limit
The Annual Income Limit or Modified Adjusted Gross Income will decide whether a claimant receives the AOTC benefit or not. The MAGI differs from person to person as marital status or claiming process will decide the same for the claimants. Individuals cannot have an annual income of more than $80,000 to avail of the full opportunity tax credit payments. The MAGI limit for couples is $160,000 when couples are filing the taxes jointly and claiming the benefit together.
Individual filers who have a higher annual income than $90,000 will not be able to get even the reduced benefits. If income falls between $80,000 and $90,000, claimants can use reduced credit payments. For married filers, the annual income limits cannot exceed $180,000. In case MAGI falls between $160,000 and $180,000, couples or joint claimants will get reduced benefits. Along with the American Opportunity Tax Credit, there is a Lifetime Learning Credit for which the annual income limits are the same as those of the AOTC. It also helps families and individuals cover education costs.
Eligibility Criteria for American Opportunity Tax Credit
If claimants meet all the following eligibility criteria, they are eligible for education benefits. Refer to the following point mentioned below
- Have filed previous year’s tax returns
- Those who are claiming the benefit have not completed their higher education
- Holds US citizenship along with supporting documents
- Have a social security number and ITIN and ATIN
- Have received the SSN, ITIN, or ATIN before the 15th of April 2024
- Claimants also need to provide the Institution’s Employer Identification Number on form 8863
- Did not claim any education benefit earlier in academic sessions
- And the claimants have not completed their 4 years of higher education before the year availing of the payments
American Opportunity Tax Credit Amount 2024
As the income decides the American Opportunity Tax Credit Amount, for regular filers the benefit is $2500 for one academic session. In a whole academic session, claimants can use up to $2500 for pursuing higher education. Beneficiaries can claim up to 100% of the first $2000 benefit for the whole academic session. After the remaining benefit amount, they can claim up to 25% depending on their annual income levels. If there is any tax liability owed by the claimant, the payment amount worth up to $1000 will be held to clear the dues.
If a claimant does not have any liability, the IRS will not hold back any credit payment. The claimants have to have their “Individual Taxpayer Identification Number” along with the “Adoption Taxpayer Identification Number”. If they do not have any ITIN or ATIN, first issue these numbers and then claim the education benefits for individual children. Beneficiaries can use the benefit amount for buying qualified educational expenses including books, supplies, education related sports and games, non-credit courses, and degree programs. Once the IRS accepts the application, it will start rolling out the American Opportunity Tax Credit.
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