There are several common errors that the IRS sees commonly made when claiming the American Opportunity Tax credit. It is important to avoid claiming the AOTC improperly. The IRS will focus on this area when auditing returns and taxpayers who claim the credit wrongly will have to pay back taxes owed.
Claim an AOTC credit for a student that did not attend a college, university or vocational school
AOTC is for post secondary education only that includes colleges, universities, vocational schools. It includes all post secondary educational institutions that are eligible to participate in a student aid program run by the Department of Education. Not all eligible schools participate in the financial aid program. If not listed, the school can answer if it is eligible to participate.
Avoid common AOTC errors
The eligible student must have attended at least half time for an academic period. The school determines full time status and the length of an academic period. If the student does not have a Form 1098-T, ask questions to determine how long the student attended, number of courses, what the school considers full time. Ask enough questions until you feel comfortable the student qualifies and let your clients know if the IRS audits them, they need to have documents supporting their claim. See the Forms 866-H-AOC and 866-H-AOC-MAX for examples of the documentation needed. Also available in Spanish, Form 886-H-AOC (SP).
Claim a credit for eligible education expenses not paid or not considered as paid
See the Compare Education Credits and Tuition and Fees Deduction chart for information on who is a qualifying student and for expenses paid or considered paid by your client for purposes of the AOTC.
Remember, No Double Benefits Allowed ask how the expenses were paid, was it from a non-taxable grant or scholarship, a qualified tuition plan, etc.
Claim a credit for unqualified education expenses
See what are Qualified Education Expenses and for more information on what qualifies and what does not qualify as expenses for Education Benefits.
Claim a credit for an eligible student for more than 4 years
AOTC is only available for four years for each eligible student. This includes any year the Hope credit was claimed for the same student.
Claim an income deduction for Tuition and Fees on Form 1040, line 34 for the same student.
See No Double Benefits Allowed for more information.
More Tips for Avoiding Errors When Claiming Education Tax Credits
- Complete the Form 8863, Education Credits, answering all questions
- Ask probing questions to verify the student’s eligibility. See our Know the Questions to Ask page
- Verify the information on the Form 1098-T is correct by asking what type of degree or certificate program the student is enrolled in. Ask how long the student has attended a post-secondary school. Ask the student’s enrollment status, undergraduate or graduate. Ask when the student started graduate studies.
- If the student doesn’t have a Form 1098-T or the Form 1098-T is incorrect, let your clients know if the IRS audits them, they need to have documents supporting their claim. See the Forms 866-H-AOC and 866-H-AOC-MAX for examples of the documentation needed. Also available in Spanish, Form 886-H-AOC (SP).