American Opportunity Tax Credit (AOTC)
Definition
A partially refundable education tax credit of up to $2,500 per student for the first four years of post-secondary education. It covers 100% of the first $2,000 in qualified education expenses and 25% of the next $2,000. Up to $1,000 (40%) is refundable. The credit phases out at MAGI between $80,000 and $90,000 ($160,000-$180,000 for joint filers). The student must be enrolled at least half-time and not have completed four years of higher education.
Example
If you pay $4,000+ in tuition and fees for your college sophomore, you can claim the full $2,500 AOTC, reducing your tax bill by $2,500 (or receiving up to $1,000 as a refund if you owe less).
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