The IRS is issuing educational refunds through the American Opportunity Tax Credit (AAOTC), and only those who paid for college in 2023 are eligible. Educational credit refunds can reach up to $2,500 in July. To qualify, it’s essential to meet certain requirements, which we explain below.
The IRS has already launched the refund for July
If a student has claimed an education credit on their tax return, the IRS has already launched the refund for July. The maximum amount of the AOTC is $2,500 per student, as previously mentioned, but not everyone is eligible for the full refund. The credit covers up to 100% of the first $2,000 spent on education expenses and 25% of the next $2,000. All this, provided the interested person attended at least half-time at a recognized institution and meets all entrance requirements
They can receive up to $1,000 in cash as long as all requirements are met
If the credit was approved and there are no errors in the application, beneficiaries can expect a refund this month. If the student’s gross income is less than $80,000 or $160,000 (if filing jointly), they can receive a full refund. The benefit will be gradually reduced until the maximum amount is reached. In any case, this credit is partially refundable, meaning that even if no taxes are owed, they can receive up to $1,000 in cash as long as all requirements are met.
30% of all American adults reported taking on at least some debt to pay for their education
It’s no secret that affording a quality education in the United States is no easy task. According to the Federal Reserve, 30% of all American adults reported taking on at least some debt to pay for their education. According to the Los Angeles Times, borrowers collectively owe $1.77 trillion in student loan debt, including both federal and private loans (as of August 2023).
Student loans must be repaid with interest, which is additional money paid for receiving a loan. The interest on a student loan obviously depends on the type of loan and when it was first available to the student or borrower. If the loan was disbursed on or after July 1, 2023, but before July 1, 2024, the borrower will have a fixed interest rate of 5.5%.
Federal student loans are backed by the government
When applying for student loans or credit, it’s important to keep in mind that there are federal and private loans. Federal student loans are backed by the government, while private loans come from banks, credit unions, or other private institutions. This is important to keep in mind when applying for a new student loan.
Keep updating the official IRS website in case there are any changes
Regarding the matter at hand, if the IRS finds discrepancies in the forms or errors in calculating educational expenses when it comes time to issue the refund, the process may be slower than expected. In this case, it’s best to be patient, as a letter will be sent to the interested party explaining the necessary adjustments or requesting the information needed to complete the process. To avoid further delays, it’s important to check that the university has correctly issued Form 1098-T, as this is key to verifying your eligibility. It’s advisable to stay up-to-date on developments and keep updating the official IRS website in case there are any changes in the reimbursement of credits.
