How much is the American Opportunity Tax Credit worth and what expenses count toward it?

The American Opportunity Tax Credit (AOTC) is worth up to $2,500 per eligible student per year during the first four years of undergraduate study. The IRS calculates it as 100% of the first $2,000 of qualified expenses plus 25% of the next $2,000. Qualified expenses include tuition, required fees, and course materials such as books and supplies, but not room, board, insurance, or transportation. Up to 40% of the credit ($1,000) is refundable, meaning you can get it even if you owe no tax. The credit phases out for higher incomes; the IRS sets the phaseout thresholds and adjusts details periodically, so confirm the current MAGI limits on irs.gov. You must have Form 1098-T from the school to claim it. Use the College Planner at wealthserene.com/tools/college-planner to see how tax credits offset your out-of-pocket cost.