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Benefits of American Opportunity Tax Credit Set to Expire

November 29, 2012

Set to expire at the end of 2012, the American Opportunity Tax Credit (AOTC) significantly enhances and broadens the permanent Hope Scholarship Credit. A post-election national poll for the National Association of College Stores reveals that most United States voters support renewing the AOTC to help families pay for college. Without congressional action, the AOTC expires and the tax credit reverts to the less generous Hope Scholarship levels. 

Source: 2012 Penn Schoen Berland National Post-Election Study

Source: 2012 Penn Schoen Berland National Post-Election Study

The AOTC increases the Hope tax credit from $1,800 to $2,500; expands eligible expenses; makes it available for four rather than only two years; increases the income phase-out thresholds; and makes the credit partially refundable.

There has been a significant increase in the use of the AOTC, predominantly by middle class students and their families. The AOTC uses a formula that particularly helps students attending low-tuition institutions, such as community colleges; for example, it covers books and course materials as well as tuition.

According to a recent U.S. Government Accountability Office study, in 2009, more than 9 million tax filers claimed the AOTC, receiving $16 billion in tax benefits. Almost 65 percent of these benefits went to tax filers with incomes above $40,000.

NACUBO, with the American Council on Education and a number of other higher education associations, sent a letter to congressional leaders in August expressing concern about the AOTC and other expiring higher education tax incentives


Liz Clark
Director, Federal Affairs