2021 American Opportunity Credit
For 2021, 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 2021-01-01Source: Publication 970 (2021), Tax Benefits for Education (IRS)Verified 2026-08-29
Compared with 2020
Every figure on this page is unchanged from 2020.
| Item | 2020 | 2021 | 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 pay qualified education expenses for an eligible student in 2021
What changed this year, and why
For 2021, the American Opportunity Credit is up to $2,500 per eligible student. Qualified education expenses up to $2,000 are credited in full, and the next $2,000 of qualified expenses are credited at 25%. These amounts are the same as in 2020.
Common questions
- How is the credit calculated?
- Qualified education expenses up to $2,000 are credited in full, plus the next $2,000 of expenses are credited at 25%, for a maximum credit of $2,500 per eligible student.
- What expenses qualify?
- Tuition, required enrollment fees, and course materials needed for a course of study.
40% of the credit is refundable, the rest only offsets tax
The American Opportunity Credit is split into two parts for refundability purposes. Of the maximum $2,500 credit, 40% is refundable. This means that even if you owe no federal income tax at all, you can still receive that refundable share as a refund. The remaining portion of the credit is nonrefundable, meaning it can only be used to reduce your tax liability dollar for dollar; any nonrefundable portion that exceeds the tax you owe is simply lost and does not generate a refund. The refundable and nonrefundable shares are calculated together when you figure the total credit on your return, so the refundability rule affects how much of the credit actually results in cash back versus tax reduction.
Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable
Publication 970 (2021), Tax Benefits for Education (IRS)
The income at which you lose the credit entirely
For 2021, the American Opportunity Credit begins to phase out once a taxpayer's modified adjusted gross income (MAGI) reaches certain levels and is eliminated entirely once MAGI hits the upper thresholds. A taxpayer filing as single, head of household, or qualifying widow(er) loses the credit completely if MAGI is $90,000 or more. A married couple filing jointly loses the credit completely if MAGI is $180,000 or more. Taxpayers whose MAGI falls below these amounts may still see a reduced credit during the phaseout range, but once income reaches or exceeds the ceiling, no credit is available at all regardless of how much qualified education expense was paid.
Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more if married filing jointly). MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit.
Publication 970 (2021), Tax Benefits for Education (IRS)
The same student can be claimed in only four tax years
The American Opportunity Credit can be claimed for a given student in at most four tax years total. A student is not an eligible student for 2021 if qualified education expenses for that same student were already used to figure the credit in any four earlier tax years. In other words, once the credit has been claimed for the student - by the student, a parent, or anyone else - for four prior years, the credit is permanently exhausted for that individual, even if the student has not yet finished the first four years of postsecondary education. If the credit was claimed for three or fewer prior years, the student may still qualify for 2021.
The student didn't have expenses that were used to figure an American opportunity credit in any 4 earlier tax years.
Publication 970 (2021), Tax Benefits for Education (IRS)
What counts as having finished the first four years
To qualify for the American Opportunity Credit in 2021, the student must not have completed the first four years of postsecondary education before the start of the year. The determination is made by the eligible educational institution and generally corresponds to the freshman through senior years of college. Academic credit earned solely through proficiency examinations is not counted toward this four-year tally. A student who has already finished those first four years - even if they have not yet earned a degree - is no longer an eligible student for this credit, though they may qualify for the Lifetime Learning Credit instead.
As of the beginning of 2021, the student had not com- pleted the first 4 years of postsecondary education (generally, the freshman through senior years of col- lege), as determined by the eligible educational insti- tution.
Publication 970 (2021), Tax Benefits for Education (IRS)
Half-time enrollment in a degree program is required
For at least one academic period beginning in 2021 (or the first three months of 2022 if qualified expenses were paid in 2021), the student must have been enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. "Half-time" is defined by the educational institution's own standards for the student's program. A student enrolled less than half-time, or enrolled in a non-degree program that does not lead to a recognized credential, does not meet this requirement and therefore cannot be the basis for an American Opportunity Credit, though expenses for such a student may still qualify for the Lifetime Learning Credit.
For at least one academic period beginning in 2021 (or the first 3 months of 2022 if the qualified expenses were paid in 2021), the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential.
Publication 970 (2021), Tax Benefits for Education (IRS)
A felony drug conviction disqualifies the student
As of the end of 2021, the student must not have been convicted of any federal or state felony for possessing or distributing a controlled substance. A student with such a conviction on their record is not an eligible student and no American Opportunity Credit can be claimed for their expenses, regardless of enrollment status, income, or amount of qualified education expense paid. The disqualification applies whether the conviction was under federal law or the law of any state. This requirement is unique to the American Opportunity Credit; the Lifetime Learning Credit has no comparable felony disqualification.
As of the end of 2021, the student had not been con- victed of a federal or state felony for possessing or distributing a controlled substance.
Publication 970 (2021), 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 (2021), Tax Benefits for Education (IRS)
- Maximum credit
Maximum credit Up to $2,500 credit per eligible student
- Expenses credited in full
1. 100% of the first $2,000 of qualified education expen- ses you paid for the eligible student, and
- Further expenses credited in part
2. 25% of the next $2,000 of qualified education expen- ses you paid for that student.
- Rate on the further expenses
2. 25% of the next $2,000 of qualified education expen- ses you paid for that student.