Who can—and who should—take the American Opportunity

This article organizes the original guidance on who can—and who should—take the american opportunity credit? into clear sections for easier reading and reference.

Overview

This opening section presents the main context from the original post.

If you have a child in college, you may be eligible to claim the American Opportunity credit on your 2016 income tax return. If, however, your income is too high, you won’t qualify for the credit—but your child might.

There is one potential downside: If your dependent child claims the credit, you must forgo your dependency exemption for him or her. And the child cannot take the exemption.

The limits

This section keeps the original guidance focused on the limits.

The maximum American Opportunity credit, per student, is $2,500 per year for the first four years of postsecondary education. It equals 100% of the first $2,000 of qualified expenses, plus 25% of the next $2,000 of such expenses.

The ability to claim the American Opportunity credit begins to phase out when modified adjusted gross income (MAGI) enters the applicable phaseout range ($160,000–$180,000 for joint filers, $80,000–$90,000 for other filers). It is completely eliminated when MAGI exceeds the top of the range.

Running the numbers

This section keeps the original guidance focused on running the numbers.

If your American Opportunity credit is partially or fully phased out, it is a good idea to assess whether there would be a tax benefit for the family overall if your child claimed the credit. As noted, this would come at the price of your having to forgo your dependency exemption for the child.

So it is important to run the numbers.

Dependency exemptions are also subject to a phaseout, so you might lose the benefit of your exemption regardless of whether your child claims the credit. The 2016 adjusted gross income (AGI) thresholds for the exemption phaseout are $259,400 (singles), $285,350 (heads of households), $311,300 (married filing jointly) and $155,650 (married filing separately).

If your exemption is fully phased out, there likely is no downside to your child taking the credit. If your exemption is not fully phased out, compare the tax savings your child would receive from the credit with the savings you would receive from the exemption to determine which break will provide the greater overall savings for your family.

We can help you run the numbers and can provide more information about qualifying for the American Opportunity credit. Give us a call at 607-272-5550 or email us at info@swcllp.com.

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Related Resources

These resources connect the article topic with related Bowers service pages and approved professional reading.

• Tax Services
• Bowers Updates
• About Bowers
• Client Accounting & Advisory Services
• Harvard Business Review
• Accounting Today

FAQ

The questions below summarize the main points already covered in the article.

What is the main focus of Who can—and who should—take the American Opportunity credit??

The article focuses on who can—and who should—take the american opportunity credit? and organizes the original guidance into sections for easier review.

What topics does the article cover first?

The article begins with the limits and then continues through the remaining points in the original post.

Which additional areas are included?

Additional sections include running the numbers.

Does the post include action items or reminders?

Yes. The original post includes listed items that have been kept in list format for easier scanning.

Was the original post wording changed?

The revision keeps the author wording and updates the structure so the post is easier to read online.