Now that the fiscal cliff tax deal has given the American Opportunity Tax Credit (AOTC) an additional five years of life, it’s time for parents of both college students and high school juniors and seniors, to learn about how this valuable tax break works. The credit reduces your federal tax bill dollar-for-dollar by up to $2,500 per year for each eligible college student for whom you pay qualified tuition expenses. It can be claimed on behalf of an undergraduate for four years—that’s a $10,000 tax subsidy, over four years. And if you have more than one child in college at the same time, you can claim more than one credit. This break had been set to expire at the end of 2012, but the fiscal cliff deal extended it for tax years 2013-2017.
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