📚 What is the American Opportunity Tax Credit (AOTC)?

The American Opportunity Tax Credit (AOTC) is a tax benefit that helps college students and their families reduce the cost of higher education. If you're paying for college, this credit can give you up to $2,500 per year for each eligible student to help cover tuition, books, and other required expenses. Even better? Up to $1,000 of that amount can be refunded to you, meaning you can get money back even if you don’t owe any taxes!

How Does It Work?

Think of the AOTC as a money-back offer on your college expenses. Here’s how it breaks down:

• The first $2,000 you spend on qualified education expenses is fully covered by the credit—meaning you get that entire amount back in tax credits.

  • A tax credit is a direct reduction in the amount of tax you owe. Unlike a deduction (which just lowers the amount of income you’re taxed on), a credit directly cuts down your tax bill

• For the next $2,000 you spend, you can get 25% back—up to $500 more in credits.

• If you don’t owe any taxes, you can still get up to $1,000 as a refund, making this one of the most valuable tax benefits for students.

Example: Alex, a sophomore at UCLA, pays $4,000 in tuition and buys $600 worth of books. By claiming the AOTC, he gets $2,500 back—which covers his grocery bills for the semester AND a spring break trip!

Don’t miss out like Alex almost did—claim your AOTC before tax season ends. Let’s check if you qualify!

🎓 Who Qualifies for the AOTC?

Not every student can claim the AOTC, so it’s important to check the requirements before filing your taxes. Here’s what you need to know:

Eligibility Requirements ✅

• You must be enrolled at least half-time in an eligible degree or certificate program.

• You can only claim AOTC for the first four years of higher education.

• You (or your parents) must claim you as a dependent on their tax return.

• No felony drug convictions on your record

• Your income must fall within limits to get the full credit:

  • Single filers: Less than $80,000 for full credit, phase-out at $90,000

  • Married filing jointly: Less than $160,000 for full credit, phase-out at $180,000

📖 What Expenses Does the AOTC Cover?

So, what can you actually get credit for? The AOTC covers more than just tuition:

✅ Qualified Expenses:

• Tuition and mandatory fees (even if you paid with a student loan!)

• Books, supplies, and equipment required for courses

• Technology like laptops (if required for your coursework)

🚫 What’s NOT Covered:

• Room and board (sorry, no credit for that overpriced dorm)

• Transportation costs (even if you’re commuting!)

• Health insurance and student activity fees (unless required for enrollment)

Make sure you keep all your receipts—you’ll need them when it’s time to file!

📝 How to Claim the AOTC

Claiming the AOTC isn’t as hard as it sounds! Just follow this simple checklist:

✅ How to Claim Your AOTC in 4 Steps

✔ Step 1: Check if you qualify (Are you in college? Did you pay for tuition, books, or supplies?) ✔ Step 2: Get Form 1098-T from your school (This shows how much you paid for tuition) ✔ Step 3: Fill out IRS Form 8863 (Your tax software or a tax professional can help!) ✔ Step 4: File your taxes and enjoy up to $2,500 in savings!

Pro Tip: Even if you don’t owe taxes, file your return anyway! You could still get up to $1,000 back as a refund.

❌ Common Mistakes to Avoid

🚫 Not keeping track of expenses. Save every receipt—just in case the IRS asks. 🚫 Claiming the credit for more than four years. The AOTC only applies to undergrad students in their first four years. 🚫 Mixing up tax credits. You can’t claim both AOTC and the Lifetime Learning Credit (LLC) for the same student in the same year. 🚫 Forgetting to file. If you don’t file a tax return, you won’t get the credit!

⏳ Important: The deadline to file your taxes and claim the AOTC for this year is April 15th! Don’t wait until the last minute—get your documents together now so you don’t miss out on free money!

📢 Claim Your AOTC & Start Building Credit!

🎓 Think of it this way—if you don’t claim the AOTC, you’re leaving up to $2,500 on the table. That’s money for books, food, rent, or even a weekend getaway. File your taxes, claim the credit, and start building your financial future today.

Beyond tax credits, another smart way to set yourself up financially in college is by building credit early. Having a good credit score can help you qualify for better student loan rates, lower interest rates on car loans, and even cheaper security deposits for apartments.

If you want to build your credit while in college, consider using a credit card to build credit and a credit building app. With Step, you can build credit without interest or hidden fees—so you’re setting yourself up for success while managing your money wisely.

Get started with a Visa credit card to build credit from Step today!