The IRS provides education credits to help taxpayers with higher education and reduce their taxes. One of the education credits, the American Opportunity Tax Credit, even boosts your refund through the credit’s refundable portion. If you have an eligible student, you can find the full information about the credit here to claim it in this tax season.
What is the 2026 AOTC Refund?
Education credits reduce taxes for the taxpayers on qualified educational expenses. The IRS offers two types of education credit: the Lifetime Learning Credit and the American Opportunity Tax Credit (AOTC). Out of the two of them, the AOTC is the refundable credit that boosts your tax refund.
AOTC is offered based on the qualified education expenses for the qualified student for the first four years of their education. The taxpayers can claim this credit for the student, who can be themselves, their spouse, or a dependent on their tax return.
The students who haven’t completed the first four years of education will get the benefit of this credit, even if the years are not consecutive. The credit is 40% refundable when the credit brings your taxes to zero.
What makes you eligible for the 2026 AOTC Refund?
You can qualify for the AOTC refund in this tax season if the eligible student you are claiming for meets the following eligibility criteria:
- The student must be enrolled in or pursuing a degree from a recognized post-secondary educational institution, participating in the student aid program of the US Department of Education.
- The student should be enrolled for at least half of the time or one academic period during the tax year 2025.
- The students should not have completed the first four years of education and never applied for the AOTC or Hope Credit for more than 4 years in the past.
- The students should not have any criminal record related to drugs or other offenses by the end of the tax year.
- The education expenses should be qualified expenses, such as books, student supplies, tuition fees, and others.
- Your income should not be over the $90,000 (for single filers) and $180,000 (for joint filers).
What would be the AOTC 2026 refund amount?
Under the AOTC, the taxpayers get the following tax breaks for the qualified expenses and an eligible student:
- The maximum AOTC credit allowed for the 2025 tax year is $2,500 for each eligible student.
- Now, if your credit reduces your taxes to zero, you can receive a refund of up to $1000 (40% of the credit).
- The AOTC credit is 10% of the first $2000 qualified expense for each student and 25% of the next $2000 educational expenses paid for the eligible student’s higher education.
How can your income affect your AOTC refund?
Your adjusted gross income would affect your AOTC refund amount in the following way that you should know:
- You will receive the full credit amount of AOTC for the qualified education expenses if your income is $80,000 or less (for single filers) and $160,000 or less (for joint filers).
- Your credit amount will be reduced if your MAGI is above $80,000 but not more than $90,000 for single filers, whereas for joint filers, it is over $160,000 but not more than $180,000.
- If you cross the income limit of $90,000 for single filers and $180,000 for joint filers, your AOTC credit will be phased out.
How can you claim the 2026 AOTC Refund?
If you have an eligible student, you can claim the AOTC refund with your tax return, but first, you need to have these:
- Form 1098-T: You will receive the Form 1098-T from the participating educational institution, which will have all the amounts received during the tax year. Remember, the amount mentioned in the form is not the whole amount to be claimed for the AOTC; you will only claim for the qualified educational expense.
- No Form 1098-T: If you did not receive the Form 1098-T from the educational institution, you can still claim the credit if you are: a non-resident alien, or have qualified expenses paid through a formal billing arrangement or scholarships, or enrolled in courses where you will not earn any academic credits.
- TIN: You must have a valid TIN (Taxpayer Identification Number) for yourself, a student, or your spouse if you are claiming for the spouse.
Once you have all the documents and information, you can claim the AOTC credit with your tax return through the following processes:
- Filed Form 8863 with your tax return
- E-filed your tax return and claimed AOTC
- Take VITA assistance to file the tax return and claim AOTC.
The tax season has begun, and you will find many ways to reduce your taxes or boost your tax refund. AOTC is one of them, so if you have a student, check the AOTC eligibility before filing your tax return.