American Opportunity Tax Credit - Information for Foreign Students
The American Opportunity Tax Credit is a credit available to help eligible students and their parents offset the cost of higher education, by reducing the amount of the federal income tax they owe. Forty percent of the credit is refundable, even if no tax is owed.
For the AOTC, an eligible student is a student who:
- is enrolled in a program leading toward a degree, certificate or other recognized post-secondary educational credential;
- has not completed the first four years of post-secondary education as of the beginning of the taxable year;
- for at least one academic period is carrying at least half of the normal full-time work load for the course of study the student is pursuing; and
- has not been convicted of a felony drug offense.
If you are in the United States on an F1 Student Visa, you would generally be considered a nonresident alien for federal tax purposes. You cannot claim the AOTC if you were a nonresident alien for any part of the tax year unless you elect to be treated as a resident alien for federal tax purposes. You also cannot claim the credit if you are married and either you or your spouse were a nonresident alien for any part of the tax year unless the nonresident alien spouse elects on a joint return to be treated as a resident alien for federal tax purposes.
To find out more about your F-1 Student Visa status, visit US Immigration Support. To learn more about resident and nonresident alien status and restrictions on claiming the education credits, read Publication 519, U.S. Tax Guide for Aliens.
Claiming the AOTC
To qualify for the AOTC, you must also meet the following requirements:
- You pay qualified education expenses for an eligible student attending an eligible educational institution.
- An eligible student is either you, your spouse or a dependent for whom you claim an exemption on your tax return.
If you qualify, you can claim the AOTC by completing Form 8863, Education Credits, and attaching it to Form 1040 or Form 1040A.
Steps to take if you erroneously claimed the AOTC
If you claimed and received the AOTC, but did not qualify for the credit, you should file a Form 1040X, Amended U.S. Individual Income Tax Return. Do not wait for the IRS to contact you. To determine where you should mail your form and repayment, if applicable, see Page 4 of the Form 1040X Instructions.
Penalty for erroneously claiming the credit
If you claimed this credit to reduce your tax liability for the year, but did not qualify for the credit, you may have to pay a penalty equal to 20 percent of the underpayment reported on your return, unless you show reasonable cause and that you acted in good faith when claiming the credit. To the extent that you claimed the AOTC as the basis for a refund but you were ineligible for this credit, you may be subject to a penalty equal to 20 percent of the excessive amount, unless you can show a reasonable basis for claiming the credit. An unpaid tax balance is subject to interest that will compound daily. It is in your best interest to pay your tax liability in full, as soon as you can, to minimize additional charges.
Common questions and answers about nonresident aliens and the AOTC
Q. Can F-1 Visa students claim the AOTC?
A. For most alien individuals present in the United States on an F-1 Student Visa, the answer is no. Generally speaking, the time spent by an alien individual studying in the United States on an F-1 Student Visa would not count toward determining whether he or she is a resident alien under the substantial presence test for federal tax purposes. Thus, if you are an alien individual with an F-1 Student Visa, you are probably a nonresident alien. In general, if you are a nonresident alien for any part of the year, you do not qualify for the AOTC.
However, your parents may qualify for the credit even if you are a nonresident alien student if they claim you as a dependent on their tax return. If you are a U.S. resident filing Form 1040, your parents do not claim you as a dependent, and you meet all of the other requirements for the credit, you may qualify for the credit.
Q. What if the student’s return was incorrectly prepared and filed by a professional tax preparer?
A. You are legally responsible for what’s on your tax return, even if it is prepared by someone else. Thus, the IRS urges you to choose a tax preparer wisely. For more information, read IRS’ Top Ten Tips to Help You Choose a Tax Return Preparer.
For more information about the American Opportunity Tax Credit, read:
- Publication 970, Tax Benefits for Education
- Publication 519, U.S. Guide for Aliens
- Tax Benefits for Education: Information Center
- American Opportunity Tax Credit
- American Opportunity Tax Credit: Questions and Answers