$2,500 Education Tax Credit Survives the Fiscal Cliff

The $2,500 American Opportunity Tax Credit for college expenses was saved when Congress agreed on the deal to avoid the so-called “fiscal cliff.”

The tax credit can help families to get up to $2,500 tax credit in higher education related expenses annually for four years. The credit was introduced as part of the 2009 American Recovery and Reinvestment Act (ARRA). The credit was extended to apply for tax years 2011 and 2012 by the Tax Relief and Job Creation Act of 2010.

Learn more about how you can take advantage of the American Opportunity Tax Credit.

About the Author

Terry Howell
Before becoming the Managing Editor for Military.com, Terry served 20 years in the U.S. Coast Guard as an Aviation Electrician’s Mate and aircrewman. In his final role in the Coast Guard, Terry served as a Career Development Advisor, where he provided career, finance, education, and benefits counseling to servicemembers and their families. Since retiring from the Coast Guard, Terry has authored the book, The Military Advantage, managed the content for TurboTap, the DoD's online transition program and VAforVets, the VA's transition assistance website. Terry earned both his Bachelor's and MBA at Corban University using Military Tuition Assistance and his GI Bill benefits to help cover the cost.
  • Joel
  • Ivan Scott

    I’m retired from the Va. Army National Guard and I’m 65 years of age. I lack just a few hours finishing my BS degree. Do I qualify for this? Thanks.

    • adam

      you can use the American Opportunity credit 4 times in you life. if you hvae never used it that you can. if you have already used it you can use the Lifetime Learning Credit. This is an other education credit. They are alittle different but will help out regardless.

    • TaxAdvisor

      The credit is for 4 years of undergraduate eduation at an accredited college. You will be entitled up to $2500 of tuition that you paid. If VA reimbursed your tuition, then the amount VA provided does not qualify. If you have not used 4 years worth of AOC or Hope Credits, then, yes, you qualify.

  • Uri

    Can I qualify for this credit despite my school being paid by the VA?.

    • adam

      To the best of my knowledge you do not qualify since your school is not being paid out of pocket. I work at my base’s tax center last year.

    • TaxAdvisor

      No, you are already being compensated for the tuition by the VA.

  • Ciera
  • Daniel Marshall


    im a veteran desert storm coming up on 25 years since ive enlisted i would like to know what benefits if any that i may be entitled to.procedure.

    please help

    Marshall,Daniel III

  • Kentros

    My spouse retired from military this year will I qualify for education benefits?

  • derrick

    The new g.I bill really sucks only 36 months of study, when a bachelor degree is 48 months of study what are the veterans of Iraq and Afganisthan suppose to do in the senior year in school when the money runs out? reenlist? most of us are combat disable veterans who only want to further our education and move on, 36 months of benefits is not enough to compensate the veterans who serve this country.

    • Mac


      I thought the same way until I started school. To obtain a bachelor’s degree only requires 36 months of actually class time. Traditionally we have done this over a four year period because of Christmas break, winter break, spring break and summer break. If you take away all the breaks you are left with 9 months of class time each year times 4 gives you a total of 36 months for your 4 year degree. The thing is you cannot afford to fail any classes or take any classes that do not offer credit. My suggestion is to knock out whatever you can using TA before you get out to give yourself a little wiggle room. I hated the thought of taking online classes, but I find that even when I retired I am still forced to take online classes to complete my requirements because there are more classes offered that way. Good luck!

    • 1SG(Ret.)

      Derrick, the GIBIll is 36 academic months which is equivalent to 4yrs of college.

    • derrick,

      When in the History of the GI Bill has it ever not been 36 months.

  • Adrian
  • Zeleno

    When you go to school year round it will only take 36 months to complete a bachelors degree. If not you should have taken advantage of TA while on active duty.

    • James

      Bingo! Seems like many would rather moan and complain or want to be spoon fed information instead of taking care of themselves. Why would you receive a tax credit for something you never paid for? No wonder our country is broke.

  • marieblagburn

    would like to know if a child of a veteran can get money for schooling ,has paid for schooling for first half of the term but is now having problems with his payment for dorm and school for the rest of the time can they get ant help from the va to pay this would apreciate any coment thanks a grand mothe of a vet and a wife of one
    m b

    • joe

      It is possible, depending on if you are service connected, also what state you live in and what state he goes to college in. In Virginia, if you are 90 percent disabled, you can apply with VDVS (Virginia Department of Veteran Services) they will pay for most of the college expenses for a state university. Please check with the veteran services for the state you live in. You can also go to the VA website and look at the links for the states. Hope this helped.

  • Ashley

    You do not receive this money. It is a credit that lowers your overall taxable income. Go to irs.gov and search the American Opportunity Tax Credit. It gives a lot of helpful information, along with some FAQ. There is a mention in there that you can receive 40%, but no more than $1,000, back on any payments that were made on tuition, book expenses, interest payments etc.

    • Tiddat33

      Actually, you do receive this money. A tax deduction lowers your overall taxable income, a tax credit actually lowers your taxes paid. The 40% limit ($1000) only applies if you pay no taxes, only 40% is refundable. It is explained better here: http://taxes.about.com/od/deductionscredits/qt/Am

  • Well, that sure is a big relief. I was getting worried that we’d have budget problems for next school year.