As a college student who was enrolled half-time, am I eligible for the American Opportunity Tax Credit and the Saver’s Credit?

by Daria D. Palaschak, CPA | Jan 11, 2019
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I was enrolled in college half-time for one semester (August to December 2018). I was in school part time the rest of the year. Am I eligible to claim the American Opportunity Tax Credit as well as the saver credit deduction for 403(b) retirement contributions?

Without knowing more facts about your situation, it is hard to know for sure if you will qualify for the American Opportunity Tax Credit (AOTC) or the Saver’s Credit, but the following are the general rules. On the surface, it looks like you should be able to qualify for both credits, as long as your income is not over the thresholds.

American Opportunity Tax Credit

To qualify, you must …

  • Be pursuing a degree or other recognized education credential
  • Be enrolled at least half time for at least one academic period beginning in the tax year
  • Not have finished the first four years of higher education at the beginning of the tax year
  • Not have claimed the AOTC or the former Hope credit for more than four tax years
  • Not have a felony drug conviction at the end of the tax year

To claim the full credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly). Your credit will be reduced if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly). You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).

Check out the IRS’s website for more information on the AOTC.

Saver’s Credit

To qualify, you must be …

  • Age 18 or older
  • Not a full-time student
  • Not claimed as a dependent on another person’s return.

The amount of the credit is 50 percent, 20 percent, or 10 percent of your retirement plan contributions, depending on your adjusted gross income (reported on your Form 1040). The maximum credit amount is $2,000 ($4,000 if married filing jointly). There are adjusted gross income thresholds at which the credit phases out, depending on your filing status. As an example, for single filers, no credit would be allowed once adjusted gross income exceeds $31,500.

The IRS’s website has more information on the Saver’s Credit.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Daria D. Palaschak, CPA, is a tax partner with Sisterson & Co. LLP in Pittsburgh, Pa.

Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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