Under AOC you can qualify up to $4000, which gives you maximum of $2500 in tax credit towards tuition and other qualified college expenses. Generally, if you start 4 yr college in Fall ( Let’s say 2014), you will finish in Spring of 2018. That means you have 5 tax filing years. If you have qualified expenses over $4000 that doesn’t help, as maximum you can claim upto $4000. Can you space the payments out so you are taking advantage of full tax credit? How would you do this?
Regarding you other thread, if you had paid spring 2015 expenses in 2014 you would have maximized the 2014 expenses for the 2014 AOTC. But if you have $4000 of expenses in 2014 regardless, then you have maximized them for 2014. You can only take the AOTC in 4 tax years.
If your student graduates in 4 years there’s no guarantee you will even be able to claim them as a dependent the year of the last semester. My son graduated last May, moved away and started his highly paid job on June 2nd… No way did we provide half his support in 2014 so he’s not our dependent this year.
So I’m taking away from this that it’s better to pay fall/spring tuition in the same year to be able to claim the credit for 4 years, in this case 2014, 2015, 2016, 2017 because you don’t know if you can claim child for 2018.
Also you might want to check if you qualify income-wise for AOTC or might have a situation where you don’t owe tax and only up to $1,000 of AOTC is refundable.
Good additional points mommdc. If you’re low enough income that you don’t owe tax though, that’s likely going to be the case or nearly the case all 4 years and $1k is better than a stick in the eye. Also, for the first year it only matters if you don’t have $4k of expenses from payments made in August/September for fall semester.
@annoyingdad, you’re right of course, $1,000 credit is still useful.
I was just thinking if people include AOTC in their college financial budget and might assume the $2500 is a sure thing only to find out later it’s not.
http://www.irs.gov/Individuals/AOTC
This link gives some info on upper income limits.
I think you should take it in the first (fall freshman) year if you qualify. You never know what will happen by year 5 (spring senior year), so take it when available. Something else might be available by senior year.
The AOTC currently is set to expire after the 2017 tax year. It could be extended but there’s a chance it won’t be.
Somewhat related. See http://www.irs.gov/pub/irs-utl/Pell%20AOTC%204%20pager.pdf. This paper discussed how to get AOTC even if you’ve been awarded Pell Grants or other scholarships.
That’s a great link 4kidsdad. I posted it in another thread, giving you credit of course. 
As long as you have $4000 in qualified expenses per year, you are eligible to take $2500 AOC.
My daughter started going to college in Fall of 2014 and would graduate in spring of 2018.
Does this mean I can claim credit for five years?
Fall 2014 - on 2014 Tax return
2015 QE on 2015 Tax return
2016 QE on 2016 Tax return
2017 QE on 2017 Tax return
last semester in 2018 on 2018 return if you time the payment, meaning make the last semester fees in Jan 2018.
This is assuming congress continues the AOC past 2017.
No, I don’t think you can claim AOTC for more than four (4) tax years for the same dependent. But the lifetime learning credit might work.
mommdc is correct; you can only claim the AOTC for the same student for a maximum of four tax years. The best strategy is normally to claim the AOTC for the first four available tax years, and then to claim the Lifetime Learning Credit for the fifth tax year, assuming the student progresses normally from fall semester of tax year 1 to spring semester of tax year 5. The LLC can be claimed for an unlimited number of years, if the student/taxpayer meets all the qualifications.
Not true. There are other limitations that may preclude taking the credit. These include the four year limit (mentioned above), a maximum AGI cutoff, and the fact that only $1,000 of the AOTC is refundable, meaning that you must have a tax balance owed to use the full credit amount of $2,500.