Can my parents claim the American Opportunity Credit? This is a common question among parents who are looking to maximize their tax benefits for their children’s education. The American Opportunity Credit (AOC) is a valuable tax credit designed to help families offset the costs of higher education. In this article, we will explore the eligibility criteria, the amount of credit available, and how parents can claim the American Opportunity Credit on their tax returns.
The American Opportunity Credit is a refundable credit that provides a significant tax break for eligible students. It is intended to help low- and middle-income families pay for the costs of education beyond high school. To determine if your parents can claim the American Opportunity Credit, it’s essential to understand the following criteria:
1. Eligible Students: The credit is available for students who are pursuing their first four years of post-secondary education. This includes full-time or part-time students enrolled in an eligible educational institution.
2. Parent’s Income: Your parents can claim the American Opportunity Credit if their modified adjusted gross income (MAGI) is below certain thresholds. For the tax year 2021, the income phase-out range for married filing jointly is $143,000 to $173,000, and for single filers, it is $86,000 to $109,000.
3. Qualified Expenses: The credit can be used to cover a variety of qualified education expenses, such as tuition, fees, books, and other course materials. Room and board expenses are not eligible for the credit unless the student is a member of the military or is enrolled in a program of at least half-time study.
4. Minimum Hours: Students must be enrolled at least half-time for at least one academic period during the tax year to qualify for the credit.
The amount of the American Opportunity Credit is 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000, for a maximum credit of $2,500 per student per year. Additionally, 40% of the credit is refundable, which means that you may receive a refund even if you don’t owe any taxes.
To claim the American Opportunity Credit, your parents must file Form 8863, Education Credits, with their tax return. They should keep all receipts and documentation of their qualified education expenses to support their claim. It’s also important to note that the American Opportunity Credit cannot be claimed for the same student in the same year as the Lifetime Learning Credit.
In conclusion, if your parents meet the eligibility criteria and have qualified education expenses, they can claim the American Opportunity Credit to help reduce their tax burden. Understanding the requirements and properly filing the necessary forms can ensure that your parents receive the maximum tax benefit for your education.
