What is the American Opportunity Tax Credit?
Updated on October 02, 2025
by Jeff Patterson
Reviewed by
Jeff Patterson is an American living in Scotland and joined the team at Expat Tax Online after experiencing the complexities of living abroad with a family.
Table of Contents
The American Opportunity Tax Credit is designed for tax-paying college students or their parents to help reduce higher education expenses. It often provides greater tax savings than other education-related tax benefits.
The American Opportunity Tax Credit reduces your tax bill dollar-for-dollar, rather than just lowering your taxable income. US expats and students abroad may also qualify if their school is listed as an eligible educational institution.
Key takeawaysWho qualifies: Undergraduate students enrolled at least half-time who haven’t finished four years and have no felony drug conviction. US expats: Americans abroad can claim the AOTC if they or their dependents are enrolled in a school that qualifies as an eligible educational institution. Credit amount: The maximum annual credit is US$2,500 per student (up to US$1,000 refundable) Eligible expenses: Tuition, fees, books, supplies, and required equipment for classes. Ineligible expenses: Room, board, transportation, and medical insurance are not covered. 2024 income phase-out limit: You can’t claim the credit if your MAGI is over US$90,000 (US$180,000 for joint filers). |
Who is eligible for the American Opportunity Tax Credit?
To qualify for the American Opportunity Tax Credit (AOTC), a student must meet all of the following conditions:
- Education level: The student has not yet completed the first four years of post-secondary education (usually the freshman through senior years of college). Graduate students are not eligible.
- Enrollment status: The student is enrolled in at least one academic period (semester, trimester, or quarter) during the tax year for which the credit is claimed.
- Course load: The student is carrying at least a half-time workload in a program that leads to a recognized degree or credential.
- Criminal history: The student must not have a felony drug conviction on their record during the tax year.
- Location: Students enrolled in foreign universities may qualify if the school is listed as an eligible educational institution by the US Department of Education’s Federal Student Aid program.
Bottom line: The AOTC is mainly for undergraduate students who are enrolled at least half-time and working toward a degree, without disqualifying convictions.
Can US expats claim the AOTC if their child studies abroad?
Yes, US expats can claim the American Opportunity Tax Credit (AOTC) if their child studies overseas, as long as the foreign university is considered an eligible educational institution.
To qualify, the foreign university must appear on the US Department of Education’s Federal Student Aid (FSA) list of eligible institutions. You can search this list directly on the Department of Education website.
What expenses qualify for the American Opportunity Tax Credit?
The American Opportunity Tax Credit (AOTC) can only be claimed for certain education-related costs. Here’s what counts and what doesn’t:
AOTC: Eligible vs. ineligible expenses
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Eligible expenses |
Ineligible expenses |
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