2018 American Opportunity Credit
For 2018, the American Opportunity Credit is $2,500 (Maximum credit), $2,000 (Expenses credited in full), $2,000 (Further expenses credited in part) and 25% (Rate on the further expenses).
Effective 2018-01-01Source: Publication 970 (2018), Tax Benefits for Education (IRS)Verified 2026-09-01
Compared with 2017
Every figure on this page is unchanged from 2017.
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Maximum credit | $2,500 | $2,500 | +$0 (+0.0%) |
| Expenses credited in full | $2,000 | $2,000 | +$0 (+0.0%) |
| Further expenses credited in part | $2,000 | $2,000 | +$0 (+0.0%) |
| Rate on the further expenses | 25% | 25% | +0% (+0.0%) |
Who it applies to
Taxpayers who claim the American Opportunity Credit for a student in the first four years of postsecondary education for tax year 2018
What changed this year, and why
For 2018, the American Opportunity Credit allows a maximum credit of $2,500 per eligible student. The first $2,000 of qualified education expenses is credited in full, and the next $2,000 of expenses is credited at 25%. The 2017 credit used the same structure and maximum.
Common questions
- How is the $2,500 maximum credit calculated?
- The first $2,000 of qualified expenses is credited in full, and the next $2,000 is credited at 25%, for a maximum credit of $2,500.
40% of the credit is refundable, the rest only offsets tax
Under the 2018 American Opportunity Credit, 40% of the credit may be refundable. This means that even if the taxpayer owes no federal income tax for the year, the IRS will pay that refundable share directly to the taxpayer as a refund. The remaining portion of the credit is nonrefundable, so it can only be used to offset income tax the taxpayer actually owes; it does not generate a refund beyond reducing the tax liability to zero. The maximum credit is $2,500 per eligible student. As a result, a portion of the credit can end up in the taxpayer's hands as a cash refund regardless of their tax bill, while the balance serves only to reduce whatever tax is due.
40% of credit may be refundable; the rest is nonrefundable
Publication 970 (2018), Tax Benefits for Education (IRS)
The income at which you lose the credit entirely
For 2018, the American Opportunity Credit is not available at all if the taxpayer's modified adjusted gross income (MAGI) reaches certain thresholds. Specifically, the credit is completely phased out for single taxpayers, heads of household, and qualifying widow(er)s with MAGI of $90,000 or more, and for married taxpayers filing jointly with MAGI of $180,000 or more. Between these thresholds and lower amounts, the credit is reduced gradually. Taxpayers whose income exceeds the upper limit cannot claim any American Opportunity Credit for the year, though they may still be eligible for other education benefits such as the Lifetime Learning Credit, which has its own income limits.
Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more if married filing jointly).
Publication 970 (2018), Tax Benefits for Education (IRS)
The same student can be claimed in only four tax years
A student is eligible for the American Opportunity Credit only if the student did not have expenses that were used to figure this credit in any four earlier tax years. This means the credit is available for a maximum of four tax years per student over their entire educational career. The rule also counts any earlier tax year in which the Hope scholarship credit was claimed for the same student, because the American Opportunity Credit replaced the Hope credit. Once a student has been the subject of this credit (or the Hope credit) in four prior years, no further American Opportunity Credit can be claimed for that student in any later year, regardless of whether the student is still enrolled in school.
The student didn't have expenses that were used to figure an American opportunity credit in any 4 earlier tax years.
Publication 970 (2018), Tax Benefits for Education (IRS)
What counts as having finished the first four years
To qualify for the American Opportunity Credit, the student must not have completed the first four years of postsecondary education before the tax year in question. For 2018, this means the student had not finished the freshman through senior years of college before the beginning of 2018, as determined by the eligible educational institution. Academic credit awarded solely because of the student's performance on proficiency examinations does not count toward this requirement. The credit is available only during these initial years of undergraduate study. Once the institution awards the student four years of academic credit for coursework completed, the student is no longer eligible. The maximum credit per eligible student is $2,500, with the first $2,000 of expenses credited in full and the next $2,000 credited at 25%.
The student hadn't completed the first 4 years of post- secondary education (generally, the freshman, sopho- more, junior, and senior years of college) before 2018.
Publication 970 (2018), Tax Benefits for Education (IRS)
Half-time enrollment in a degree program is required
For at least one academic period beginning in 2018, or the first three months of 2019 if the qualified expenses were paid in 2018, the student must have been enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. This means the student cannot be taking courses on a casual or non-degree basis; they must be formally pursuing a credential at an eligible educational institution. Half-time enrollment is the minimum threshold; full-time students also qualify. The requirement applies to at least one academic period during the year, so a student who meets this condition for even one semester satisfies it for the entire tax year. The maximum credit per eligible student is $2,500, with the first $2,000 of qualified expenses credited in full and the next $2,000 credited at 25%.
For at least one academic period beginning in 2018 (or the first 3 months of 2019 if the qualified expenses were paid in 2018), the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential.
Publication 970 (2018), Tax Benefits for Education (IRS)
A felony drug conviction disqualifies the student
A student is not eligible for the American Opportunity Credit if the student has been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of the tax year. This disqualification applies regardless of whether the conviction occurred in the current year or any prior year, and it applies to both federal and state convictions. The rule is specific to drug-related felonies; other types of criminal convictions do not affect eligibility for this credit. The student must be free of such a conviction as of the last day of the tax year to qualify.
The student hasn't been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2018.
Publication 970 (2018), Tax Benefits for Education (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Publication 970 (2018), Tax Benefits for Education (IRS)
- Maximum credit
Maximum credit Up to $2,500 credit per eligible student
- Expenses credited in full
100% of the first $2,000 of qualified education expen- ses you paid for the eligible student
- Further expenses credited in part
25% of the next $2,000 of qualified education expen- ses you paid for that student
- Rate on the further expenses
25% of the next $2,000 of qualified education expen- ses you paid for that student