Can You Claim the American Opportunity Credit if You Got a Scholarship?
Scholarships are a great way to help pay for college expenses. But did you know that you may still be able to claim the American Opportunity Credit (AOTC) even if you received a scholarship?
The AOTC is a tax credit of up to $2,500 per eligible student to help pay for college expenses. To qualify for the AOTC, the student must be enrolled at least half-time in a degree or certificate program at an eligible educational institution. The student must also have not completed the first four years of post-secondary education before the beginning of the tax year.
If the student receives scholarships that cover all or most of the eligible expenses, the taxpayer could always elect to treat all or part of the scholarship as taxable income to claim the American Opportunity Tax Credit. This means that the taxpayer would need to report the scholarship as income on their tax return and then claim the AOTC.
The taxpayer would then need to subtract the amount of the scholarship from the total eligible expenses. The taxpayer can then claim the AOTC for the remaining eligible expenses. For example, if the total eligible expenses are $10,000 and the student receives a scholarship of $8,000, the taxpayer can claim the AOTC for the remaining $2,000 of eligible expenses.
The taxpayer should also be aware that if the student receives a scholarship that is greater than the total eligible expenses, the taxpayer cannot claim the AOTC. In this case, the taxpayer would need to report the scholarship as income on their tax return.
It is important to note that the taxpayer cannot claim the AOTC for the same expenses for which the student received a scholarship. The taxpayer must subtract the amount of the scholarship from the total eligible expenses before claiming the AOTC.
In summary, if the student receives scholarships that cover all or most of the eligible expenses, the taxpayer could always elect to treat all or part of the scholarship as taxable income to claim the American Opportunity Tax Credit. The taxpayer would then need to subtract the amount of the scholarship from the total eligible expenses before claiming the AOTC.
