The American Opportunity Tax Credit is a credit of up to $2,500 for qualified higher education expenses incurred for each eligible student including you, your spouse and your dependents. The credit is equal to 100 percent of the first $2,000 of qualified expenses plus 25 percent of the next $2,000 of qualified expenses. Up to 40 percent of the credit is available as a refundable credit.
The credit is not available to taxpayers who file married filing separately, are nonresident aliens, have too high a modified adjusted gross income or are listed as a dependent on another person's tax return. Complete details on who can claim the credit, who is an eligible student, the definition of qualified expenses, recapturing of the credit and avoiding claiming double tax benefits (for example, you cannot take the credit in the same year you claim a tuition and fees deduction for the same student) can be found in IRS Pub 970. You can also use the IRS Interactive Tax Assistant to determine if you are eligible for this credit.