Higher education is important if you want to make a good salary. It is very expensive, but the American Opportunity Tax Credit can take a bit of the bite off it. 

A recent report suggested that a college education was good for, well, partying and not much else. I’ll admit I thought beer was one of the four food groups when I was in college, but there is no disputing that a degree helps open avenues to you that otherwise would be closed. This is particularly true if you seek out a post graduate degree. I became a lawyer, for instance. While I don’t particularly care for the practice, it does pay well. 

The problem with higher education these days is crystal clear – it is insanely expensive. The answer now as it has always been is to take out student loans. The problem is you end up graduating with more debt than the State of California. At least it seems like that. The American Opportunity Tax Credit won’t prevent that, but it can help a bit. 

The “AOTC” is a tax credit of up to $2,500 per student. It is aimed at students seeking their undergraduate degree. You must be enrolled at least half the time during the quarter in question and must be seeking a recognized degree. The credit only applies to qualified expenses which include the basic items you would expect – tuition, books, supplies and equipment.

So, who exactly can claim this credit? The answer is either you, your spouse or dependents. If you are paying for your child to go to college, you can claim it for them. If your wife goes back to school, you can claim it for her. The key limitation is you can only claim it once per family. If you send two kids to college, you can only claim it for one. 

When it comes to higher education, the American Opportunity Tax Credit isn’t a cure to the incredibly high costs. That being said, it is a step in the right direction.