American Opportunity Tax Credit

American Opportunity Tax Credit


Many Parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit.  This tax credit is part of the American Recovery and Reinvestment Act of 2009.


1. The credit, which expands and renames the Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 & 2010.  Qualified tuition and related expenses included tuition, related fees, books, and other required course materials.


2. The credit is equal to 100% of the first $2000 spent and 25% of the next $2000 per student each year.  Basically, the full $2500 credit will be available for taxpayers who paid $4000 or more in qualifying expenses for an eligible student.


3. The full credit is subject to income phase outs (AGI limitations) of $80,000 for single taxpayers and $160,000 for married couples.


4. 40% of the credit is refundable, so even those who owe no tax can get up to $1000 of the credit for each eligible student as cash back.


5. The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.


6.  You cannot claim the tuition and fess tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit.  You must choose to either take the credit or the deduction, which ever is more beneficial for you.