What is the American Opportunity Tax Credit (AOTC)? The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $2,500 for out of pocket higher education expenses for course materials, tuition, and fees in 2009 and 2010. On November 09, 2011, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 extended the AOTC for two additional years until Dec. 31, 2012. The Internal Revenue Service Publication 970 provides detailed information, useful examples and guidance on all of the educational benefits of the tax code, including the new American Opportunity Tax Credit. If you have more specific questions, we strongly encourage you to consult the financial aid office of your institution, a qualified tax advisor or legal professional about your unique situation, and consult the 2010 Internal Revenue Service Publication 970 when it is released later this year.
What course materials are eligible for the tax credit? The ARRA specifies that "required" course materials are eligible for the tax credit as well as tuition and fees that have not been paid for by grant or scholarship aid. In other words, you may not receive a double benefit for your qualified expenses. Required course materials have been defined by the IRS in other educational tax benefit programs as including books, supplies, and equipment that are required for the courses at the eligible educational institution. As a practical matter, it would be fair to assume that any purchased course materials identified as required and listed on a course book list for your registered classes would likely qualify for the tax credit. What necessary documentation will we need for the tax credit?
According to the IRS, taxpayers should retain adequate documentation to prove education-related expenses, such as transcripts or course descriptions that show periods of enrollment, list of course materials for your classes, cancelled checks, and receipts that verify the amounts spent on tuition, books, supplies, and equipment used in a course of study. IRS Publication 552 (Recordkeeping for Individuals) addresses this issue.
Informational Links and Flyers:
Textbook Aid Information Flyer
American Opportunity Tax Credit Link
American Opportunity Basic Information Video