FAQ
About the
American
Opportunity
Tax Credit
What is the American
Opportunity Tax Credit?
Under The American Recovery and Reinvestment
Act of 2009 and extended by the Tax Relief,
Unemployment Insurance Reauthorization, and Job
Creation Act of 2010, a tax credit of up to $2,500 each
year has been authorized for out-of-pocket higher
education expenses for course materials, tuition, and
fees for 2009 through 2012. The credit is applied for
by using form 8863.
The IRS Publication 970 provides detailed
information, useful examples, and guidance on all
of the educational benefits of the tax code, including
the American Opportunity Tax Credit. If you have more
specific questions, we strongly encourage you to
consult the financial aid office of your institution, a
qualified tax advisor or legal professional, or the IRS
about your unique situation.
What course materials are
eligible for the tax credit?
Under the AOTC, “required” course materials are eligible
for the tax credit as well as tuition and fees that have
not been paid for by grant or scholarship aid. In other
words, you may not receive a double benefit for your
qualified expenses. Qualified ”course materials” include
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. As a practical matter, it would be fair to
assume that any purchased course materials identified
as required and listed on a course book list for your
registered classes would qualify for the tax credit.
What documentation will
we need for the tax credit?
According to the IRS, taxpayers should retain adequate
documentation to prove education-related expenses,
such as transcripts or course descriptions that show
periods of enrollment, list of course materials for your
classes, cancelled checks, and receipts that verify
the amounts spent on tuition, books, supplies, and
equipment used in a course of study. IRS Publication 552
(Recordkeeping for Individuals) addresses this issue.
Still have questions or need
additional information?
Visit the Internal Revenue Service’s American
Opportunity Credit: Questions and Answers web page
at http://www.textbookaid.org/irsqa.aspx.
American Opportunity
Tax Credit At A Glance
• In 2009 through 2012, tax credit of up to $2,500 of
the out of-pocket cost of tuition and related expenses
including course materials paid during the taxable year.
• Eligible for the first four years of college.
• Receive 100% of the first $2,000 and 25% of
the next $2,000.
• 40% of the credit is refundable with the maximum
refundable amount of $1,000.
• Phase-out for taxpayers with adjusted gross income
(AGI) in excess of $80,000, or $160,000 for married
couples filing jointly (AGI phase-out limits are $90,000
individual, $180,000 married couples filing jointly).
• 4.5 million students and families received a
tax refund from the AOTC in 2009 with an average
value of $800.
You Must Keep a Record of Your
Expenses to be Eligible!
Visit www.textbookaid.org
Receive a Tax Credit for
Hitting the Books!
According to the IRS, the credit:
• Replaces and expands the Hope Credit.
• Includes course materials in the list of qualifying expenses.
• Allows the credit to be claimed for the first four
post-secondary education years.
You may
qualify for a
maximum annu
al
credit of $2,500
, and
a partial refund
of
up to $1,000.
For Example:
Your federal tax liability is $2,000 before the American Opportunity Tax Credit and your student had $5,000 in allowable
higher education expenses. The first $2,000 in out-of-pocket textbook purchases, tuition, and fees goes towards your tax
credit at 100%. Everything over that is allowable at 25% up to a total credit per student of $2,500.
You would have a credit of $2,000 plus $500 of the remaining $3,000 (25% of the expenses over $2,000 up to an extra
$500 credit). Because this credit is partially refundable, the $2,500 credit results in a refund of $500!
If your tax liability is zero and the student’s credits were $2,500, you can receive a refund of $1,000 because the credit is
40% percent refundable (.40 x $2,500 = $1,000).
See www.irs.gov for more info.
© 2011 National Association of College Stores
Disclaimer: National Association of College Stores is providing this information for general
guidance only. The information in this brochure does not constitute legal advice, tax advice,
accounting advice or professional advice of any kind. There is no substitute for consultation
with professional advisors based on the facts of each individual situation. NACS disclaims
any liability whatsoever in connection with the accuracy or completeness of the material on
this web site, or reliance on the general guidance provided.