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6 Benefits of the American Opportunity Tax Credit

6 Benefits of the American Opportunity Tax Credit

The American Opportunity Tax Credit is a significant improvement over the previous Hope Credit that was implemented under the American Recovery and Reinvestment Act (ARRA). Think of it as the Post 9/11 GI Bill upgrade of the MGIB, without all the complications.

If you have yet to begin or are currently enrolled in your first four years of college education, then the American Opportunity Tax Credit could save you substantial sums of money by allowing you access to thousands of extra education dollars each year.

And if you are looking to enroll at one of the top Military Friendly Schools, be sure to consider some of our favorites: Colorado State University Global Campus, Jones International University and Robert Morris University. Each of these schools offers significant discounts for military personnel and are experts at helping educate military students.

6 Major Advantages of the American Opportunity Tax Credit over the Hope Credit include:

  1. $2500 a year in annual credits. The American Opportunity Tax Credit offers up to $2500 a year in annual credits. This is a $700 increase from the Hope Credit.
  2. Four full years of availability. The American Opportunity Tax Credit offers benefits for up to four years of education, versus just two years offered by the previous Hope Credit program.
  3. Accessible to a broader range of tax payers. Only those taxpayers with an income of over $80,000 a year (or $160,000 for married couples filing a joint return) are ineligible to file for participation in the program. This income limit is much more generous than what was offered by the Hope Credit.
  4. Inclusion of course materials. In addition to other qualifying educational costs previously covered by the Hope Credit’s benefits package (which was limited to your out-of-pocket tuition expenses after application of Post 9/11 GI Bill and other financial aid programs) the new American Opportunity Tax Credit program includes course materials as part of the list of covered learning expenditures. This new benefit could save you an additional hundreds of dollars per semester!
  5. Most qualified students will receive $2000 or more. Credit is based on the first 100% of the first $2000 of tuition and other expenditures, followed by 25% of the next $2000 in tuition and other expenditures.
  6. You can apply merely by attaching Form 8863 to your 1040 or 1040EZ. Since you only have to include a single additional form, applying for the American Opportunity Tax Credit is much easier than many other military education assistance programs.

But remember that the American Opportunity Tax Credit is only worth applying for if you have significant tuition or other educational expenditures that are not already covered by your Post 9/11 GI Bill, MGIB, or other military financial aid programs.

Since the AOTC is meant to help cover money that would otherwise have to be paid out of the student’s or parent’s pocket, it does not overlap or allow you to double dip with other financial aid programs.

Qualified Expenses

Qualified tuition and related expenses are:

  • Tuition and fees required for enrollment or attendance at an eligible education institution
  • Course materials such as books, supplies and equipment needed for class
  • Computer software, lab supplies and other items needed to complete coursework

Remember, you must reduce the qualified expenses by the amount of any tax-free educational assistance you received.

And because many Military Friendly Colleges and Universities still have hundreds to thousands of dollars left over in military education benefits even after their participation in the Yellow Ribbon Program, you’ll want to be sure to find out if you can qualify for the new American Opportunity Tax Credit if you need any additional tuition assistance! Don’t let this opportunity pass you by before it’s too late.

To read more about the AOTC program, visit the official page for the American Opportunity Tax Credit at the IRS Website.

Or for additional information about military education benefits, tuition assistance, and scholarships for military service members, please request our Free Military Education Handbook.