College costs are high and increasing every year. The federal government offers a credit to help defray the costs of a college education. If you have a child in college, you may be eligible to claim the American Opportunity credit on your 2016 income tax return. However, the credit’s income limitations may preclude your ability to qualify for the credit. If you earn too much to take the credit, your child may be eligible to claim the credit.
The American Opportunity credit equals 100% of the first $2,000 of qualified expenses, plus 25% of the next $2,000 of such expenses. The credit is capped at $2,500 per student, per year for the first four years of postsecondary education.
The American Opportunity credit begins to phase out when modified adjusted gross income (MAGI) exceeds $160,000 for joint filers ($80,000 for others) and is completely eliminated when MAGI exceeds $180,000 for joint filers ($90,000 for others)