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Publication 970
taxmap/pubs/p970-003.htm#en_us_publink1000204308

Chapter 2
American Opportunity Credit(p8)

taxmap/pubs/p970-003.htm#en_us_publink1000273661Introduction

For 2012, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the American opportunity credit (this chapter) and the lifetime learning credit (chapter 3).
This chapter explains:
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What is the tax benefit of the American opportunity credit.(p8)

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For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student.
A tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Forty percent of the American opportunity credit may be refundable. This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you.
Your allowable American opportunity credit may be limited by the amount of your income. Also, the nonrefundable part of the credit may be limited by the amount of your tax.
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Overview of the American opportunity credit.(p8)

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See Table 2-1, Overview of the American Opportunity Credit, for the basics of this credit. The details are discussed in this chapter.
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Can you claim more than one education credit this year.(p8)

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For each student, you can elect for any year only one of the credits. For example, if you elect to take the American opportunity credit for a child on your 2012 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2012.
If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year.
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Differences between the American opportunity and lifetime learning credits.(p8)

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There are several differences between these two credits. For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope credit for that student. However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2012 near the end of this publication.
Deposit
If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit.
Table 2-1. Overview of the American Opportunity Credit
Maximum credit Up to $2,500 credit per eligible student
Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er)
Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable
Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2012
Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope credit was claimed)
Type of program required Student must be pursuing a program leading to a degree or other recognized education credential
Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year
Felony drug conviction As of the end of 2012, the student had not been convicted of a felony for possessing or distributing a controlled substance
Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance
Payments for academic periods Payments made in 2012 for academic periods beginning in 2012 or beginning in the first 3 months of 2013
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Can You Claim the Credit(p9)

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The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return.
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Who Can Claim the Credit(p9)

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Generally, you can claim the American opportunity credit if all three of the following requirements are met.
Note.Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you.
"Qualified education expenses" are defined later under Qualified Education Expenses. "Eligible students" are defined later under Who Is an Eligible Student. A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses.
You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2012, later, helpful in determining if you can claim an American opportunity credit on your tax return.
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taxmap/pubs/p970-003.htm#en_us_publink1000236169
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Who Cannot Claim the Credit(p9)

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You cannot claim the American opportunity credit for 2012 if any of the following apply.