American Opportunity Tax Credit

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American Opportunity Tax Credit

Postby AAA » Sat Feb 09, 2013 6:30 pm

One of our children is in the last year of a five-year program (due to co-ops in earlier years) and is considered by the school to be a senior. The AO credit was only used three times previously for this child.

In Pub 970 (Tax Benefits for Education) the IRS says in one place says "Available ONLY for the first 4 years of postsecondary education." That would seem to make it unavailable to us at this time. But elsewhere in Pub 970, under Who is an Eligible Student, it says, among other things: "The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college)."

So do you think there's room here to interpret what is meant by "4 years of postsecondary education" as long as the student is legitimately considered a senior?

Thanks.
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Re: American Opportunity Tax Credit

Postby HueyLD » Sat Feb 09, 2013 6:38 pm

AAA wrote:One of our children is in the last year of a five-year program (due to co-ops in earlier years) and is considered by the school to be a senior. The AO credit was only used three times previously for this child.

In Pub 970 (Tax Benefits for Education) the IRS says in one place says "Available ONLY for the first 4 years of postsecondary education." That would seem to make it unavailable to us at this time. But elsewhere in Pub 970, under Who is an Eligible Student, it says, among other things: "The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college)."

So do you think there's room here to interpret what is meant by "4 years of postsecondary education" as long as the student is legitimately considered a senior?

Thanks.

On page G-3 of the IRS Pub 4012, it says:

"Even if the student's post-secondary education extends beyond four tax years, the American Opportunity credit is available for only four years."
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Re: American Opportunity Tax Credit

Postby tibbitts » Sat Feb 09, 2013 7:27 pm

HueyLD wrote:
AAA wrote:One of our children is in the last year of a five-year program (due to co-ops in earlier years) and is considered by the school to be a senior. The AO credit was only used three times previously for this child.

In Pub 970 (Tax Benefits for Education) the IRS says in one place says "Available ONLY for the first 4 years of postsecondary education." That would seem to make it unavailable to us at this time. But elsewhere in Pub 970, under Who is an Eligible Student, it says, among other things: "The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college)."

So do you think there's room here to interpret what is meant by "4 years of postsecondary education" as long as the student is legitimately considered a senior?

Thanks.

On page G-3 of the IRS Pub 4012, it says:

"Even if the student's post-secondary education extends beyond four tax years, the American Opportunity credit is available for only four years."

True but that statement doesn't exclude the OP - in fact it suggests the credit could still apply, since it doesn't say the first four years, as does the OP's original citation. I'm definitely not an expert but it sounds like the credit is still a possibility here. Having taken it for 4 years (which still weren't quite sufficient to complete a AS degree... but almost!), it's an awesome credit... but how much money is involved here vs. the usual, but much less potentially lucrative, continuing education credits?

Paul
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Re: American Opportunity Tax Credit

Postby kaneohe » Sat Feb 09, 2013 7:42 pm

I don't claim to know the answer either. Until very recently, I would have voted w/ Huey but somewhere I saw a similar thread.

The 4012 also has this on the same page:
Available for first 4 years of post secondary education, cannot be claimed more than 4 tax years

I am wondering if you could interpret this as:
Available for first 4 years (academic equivalent) of post secondary education, cannot be claimed more than 4 tax years
so if you went half-time for 8 yrs......you would be eligible for any 4 tax years out of those 8 or 9 tax years?

They could have made it clearer:
Available for first 4 TAX years of post secondary education, cannot be claimed more than 4 tax years
if they wanted to restrict it narrowly. I'm wondering if they were just trying to keep grad school out of the credits.
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Re: American Opportunity Tax Credit

Postby MathWizard » Sat Feb 09, 2013 8:26 pm

They just want no more than 4 years and only for an undergraduate degree.
This applies to AO and Hope Credit combined, so you can't take Hope for
2 years, then AO for 4 years, it is 4 years total.

The AO was to expire after 2012, but it was extended, for another 4 years I believe.
Note that normally a student completing a degree in 4 years starting with a fall semester
would be in college during 5 tax years. Typically you want to claim the fall year of the
freshnam year because if your child gets a job right after graduation, they will earn enough
so that they will not be a dependent on your return.

TurboTax just asks you how many times the Hope and AO credits have been used.
(I just finished my taxes, and took the Hope credit in the first year, and could not
tae 4 years of AO tax credit.)
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Re: American Opportunity Tax Credit

Postby jared » Sat Feb 09, 2013 8:32 pm

I think kaneohe is referring to this thread:
viewtopic.php?f=1&t=110253#p1603605

jared wrote:The determining factor for the "first 4 years of college" rule is whether or not the institution awards the student with 4 years of academic credit (excluding credit based on proficiency exams) at that institution prior to the beginning of that tax year.

Yes, the credit can be claimed for only 4 taxable years. However, the student may actually be in school for a period that lasts longer than 4 years and still be eligible for the credit.


The requirement really has nothing to do with the number of calendar years the student is in school.
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Re: American Opportunity Tax Credit

Postby HouseStark » Sat Feb 09, 2013 8:34 pm

If look at the current Form 8863, which is used to claim the AOTC, it asks whether the student has CLAIMED the AOTC and Hope Credit combined for more than 3 years. It can be used up to four times, even if the student only goes half-time and takes more time than that. I wouldn't worry about whether the student is a senior or not.

Also, even if a student completes a four-year program in the standard time, the student could commonly still have expenses in five calendar years. If a student is a graduating senior in the spring of 2013, they could have started in the fall of 2009. That's five different tax years, but only four of those could use the AOTC.

As far as being a graduate student after under four years of using AOTC, the 1098-T has a box that can be marked for graduate student. If that box is marked the student would not qualify for the AOTC but could still use the Lifetime Learning Credit.
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Re: American Opportunity Tax Credit

Postby Bob's not my name » Sat Feb 09, 2013 8:46 pm

This thread may be helpful: viewtopic.php?f=1&t=110253&newpost=1603388
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Re: American Opportunity Tax Credit

Postby HueyLD » Sat Feb 09, 2013 8:46 pm

Here is more IRS' guidelines:

Q12. Who is an eligible student for the American opportunity tax credit?

A. For the American opportunity tax credit, an eligible student is a student who: (1) is enrolled in a program leading toward a degree, certificate or other recognized post-secondary educational credential; (2) has not completed the first four years of post-secondary education as of the beginning of the taxable year; (3) for at least one academic period is carrying at least ½ of the normal full-time work load for the course of study the student is pursuing; and (4) has not been convicted of a felony drug offense.

Q13. If a student was an undergraduate during the first part of the taxable year and became a graduate student that same year, will the student qualify for the American opportunity tax credit?

A. If a student has not completed the first four years of post-secondary education as of the beginning of the taxable year, and has not claimed the Hope scholarship credit and/or the American opportunity tax credit for more than four taxable years, the student can claim the American opportunity tax credit for qualified expenses paid during the entire taxable year.

http://www.irs.gov/uac/American-Opportu ... nd-Answers
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Re: American Opportunity Tax Credit

Postby AAA » Sun Feb 10, 2013 2:58 pm

HueyLD wrote:Here is more IRS' guidelines:

Q12. Who is an eligible student for the American opportunity tax credit?

A. For the American opportunity tax credit, an eligible student is a student who: (1) is enrolled in a program leading toward a degree, certificate or other recognized post-secondary educational credential; (2) has not completed the first four years of post-secondary education as of the beginning of the taxable year; (3) for at least one academic period is carrying at least ½ of the normal full-time work load for the course of study the student is pursuing; and (4) has not been convicted of a felony drug offense.

Q13. If a student was an undergraduate during the first part of the taxable year and became a graduate student that same year, will the student qualify for the American opportunity tax credit?

A. If a student has not completed the first four years of post-secondary education as of the beginning of the taxable year, and has not claimed the Hope scholarship credit and/or the American opportunity tax credit for more than four taxable years, the student can claim the American opportunity tax credit for qualified expenses paid during the entire taxable year.

http://www.irs.gov/uac/American-Opportu ... nd-Answers


That last paragraph does the trick.

Thanks.
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Re: American Opportunity Tax Credit

Postby jared » Sun Feb 10, 2013 3:09 pm

See Federal Tax Regulations,regulation,§1.25A-3(d)(1)(iii)
(iii)Year of study requirement.—As of the beginning of the taxable year, the student has not completed the first two years of postsecondary education at an eligible educational institution. Whether a student has completed the first two years of postsecondary education at an eligible educational institution as of the beginning of a taxable year is determined based on whether the institution in which the student is enrolled in a degree program (as described in paragraph (d)(1)(i) of this section) awards the student two years of academic credit at that institution for postsecondary course work completed by the student prior to the beginning of the taxable year. Any academic credit awarded by the eligible educational institution solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed two years of postsecondary education; and


Substitute "four" for "two". These regs were written for Hope Scholarship Credit before AOC existed.
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