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

Chapter 2
American Opportunity Credit(p8)

For Use in Tax Year 2013

taxmap/pubs/p970-003.htm#en_us_publink1000273661Introduction

For 2013, 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)

For Use in Tax Year 2013
rule
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)

For Use in Tax Year 2013
rule
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)

For Use in Tax Year 2013
rule
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 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013.
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)

For Use in Tax Year 2013
rule
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 Scholarship 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 2013 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 2013
Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship 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 2013, 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 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014
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Can You Claim the Credit(p9)

For Use in Tax Year 2013
rule
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)

For Use in Tax Year 2013
rule
Generally, you can claim the American opportunity credit if all three of the following requirements are met.
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Student qualifications.(p9)

For Use in Tax Year 2013
rule
Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met.
  1. As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations.
  2. Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met.
  3. For at least one academic period beginning (or treated as beginning) in 2013, the student both:
    1. Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and
    2. Carried at least one-half the normal full-time workload for his or her course of study.The standard for what is half of the normal full-time work load is determined by each eligible educational institution. However, the standard may not be lower than any of those established by the U.S. Department of Education under the Higher Education Act of 1965.
      For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. See Prepaid expenses, later.
  4. As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance.
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Example 1.(p9)

Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. Sharon claimed the American opportunity credit on her 2012 tax return. The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. If Sharon were to file Form 8863 for 2013, she would check "Yes" for Part III, line 23, and would be eligible to claim only the lifetime learning credit.
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Example 2.(p9)

Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. If Wilbert were to file Form 8863 for 2013, he would check "No" for Part III, line 23. If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit.
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Example 3.(p10)

Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. Glenda pays her tuition for the 2014 Spring semester in December 2013. Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013.
Deposit
If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead.
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 2013, later, helpful in determining if you can claim an American opportunity credit on your tax return.
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Who Cannot Claim the Credit(p10)

For Use in Tax Year 2013
rule
You cannot claim the American opportunity credit for 2013 if any of the following apply.