Tax Court Summary Opinion: American Opportunity Credit

A recent US tax court summary opinion addressed the year in which the American Opportunity Tax Credit (“AOTC”) could be taken on one’s tax return.  As set forth in Section 25A of the Code, the AOTC is a refundable credit for up to $2,500 of qualified educational expenses relating to the first for years of higher education.  The availability of the credit is subject to certain limitations, including a phase-out that begins at $80,000 modified adjusted gross income.

At issue in  Lucas Matthew McCarville v. Comm’r, T.C. Summary Opinion 2016-14 (“McCarville”) was the appropriate tax year for the credit.  In short, in 2011 the taxpayer paid tuition expenses for tuition expenses relating to a spring semester that began in January 2012.  As discussed, by the tax court, it seems fairly clear that the credit should have been claimed on the taxpayer’s 2011 tax return.  In the case of payment in a taxable year for any academic period beginning in the 3 months following that taxable year, the credit is allowable only in the taxable year of the payment.

The taxpayer claimed the credit in the year following the payment and the tax court concluded that was incorrect.  The taxpayer’s argument seemed to be “[i]t just seems kind of wrong”.  I’ll just leave that there.


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