The amount of the American opportunity credit (per eligible student) is the sum of:
- 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and
- 25% of the next $2,000 of qualified education expenses you paid for that student.
The maximum amount of American opportunity credit you can claim in 2009 is $2,500 times the number of eligible students. You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of qualified education expenses. However, the credit may be reduced based on your MAGI. See Effect of the Amount of Your Income on the Amount of Your Credit
on the next page.
Jack and Kay Ford are married and file a joint tax return. For 2009, they claim an exemption for their dependent daughter on their tax return. Their MAGI is $70,000. Their daughter is in her junior (third) year of studies at the local university. Jack and Kay paid qualified education expenses of $4,300 in 2009.
Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. Jack and Kay can claim a $2,500 American opportunity credit in 2009. This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000.taxmap/pubs/p970-007.htm#en_us_publink1000204393
To help you figure your American opportunity credit, you should receive Form 1098-T
. Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by February 1, 2010. An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you actually paid. When figuring the credit, use only the amounts you paid or were deemed to have paid in 2009 for qualified education expenses.
In addition, your Form 1098-T should give you other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether you were enrolled at least half-time or were a graduate student.
The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number.taxmap/pubs/p970-007.htm#en_us_publink1000204394
The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). taxmap/pubs/p970-007.htm#en_us_publink1000204395
For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.taxmap/pubs/p970-007.htm#en_us_publink1000204396
If you file Form 1040A, your MAGI is the AGI on line 22 of that form.taxmap/pubs/p970-007.htm#en_us_publink1000204397
If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any:
- Foreign earned income exclusion,
- Foreign housing exclusion,
- Foreign housing deduction,
- Exclusion of income by bona fide residents of American Samoa, and
- Exclusion of income by bona fide residents of Puerto Rico.
You can use Worksheet 2-1, below, to figure your MAGI.
Worksheet 2-1. MAGI for the American Opportunity Credit
|1.||Enter your adjusted gross income |
(Form 1040, line 38)
| ||1.|| |
|2.||Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)|| ||2.|| || || |
|3.||Enter your foreign housing deduction (Form 2555, line 50)|| ||3.|| || || |
|4.||Enter the amount of income from Puerto Rico you are excluding|| ||4.|| || || |
|5.||Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)|| ||5.|| || || |
|6.||Add the amounts on|
lines 2, 3, 4, and 5
| ||6.|| |
|7.||Add the amounts on lines 1 and 6. |
This is your modified adjusted
gross income. Enter here and
on Form 8863, line 11
| ||7.|| |
If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 9–15 of Form 8863. The same method is shown in the following example.taxmap/pubs/p970-007.htm#en_us_publink1000204401
You are filing a joint return and your MAGI is $165,000. In 2009, you paid $5,000 of qualified education expenses.
You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses).
Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). The result is the amount of your phased out (reduced) American opportunity credit ($1,875).
| ||$2,500||×|| $180,000 − $165,000 |
Forty percent of the American opportunity credit is refundable for most taxpayers. However, if you were under age 24 at the end of 2009 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Instead, your allowed credit (figured on Form 8863, Part V) will be used to reduce your tax as a nonrefundable credit only.
You do not
qualify for a refund if items 1, 2, and 3 below apply to you.
- You were:
- Under age 18 at the end of 2009, or
- Age 18 at the end of 2009 and your earned income (defined below) was less than one-half of your support (defined below), or
- A full-time student over age 18 and under age 24 at the end of 2009 and your earned income (defined below) was less than one-half of your support (defined below).
- At least one of your parents was alive at the end of 2009.
- You are not filing a joint return for 2009.
Examples of earned income include wages, salaries, tips, and other taxable employee pay; net earnings from self-employment; and gross income received as a statutory employee. Statutory employees include full-time life insurance agents, certain agent or commission drivers and traveling salespersons, and certain homeworkers.taxmap/pubs/p970-007.htm#en_us_publink1000211790
Your support includes all amounts spent to provide you with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. To figure your support, count support provided by you, your parents, and others. However, a scholarship received by you is not considered support if you are a full-time student. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for details.