American Opportunity Credit helps pay for College
October 23, 2009
If college expenses are stretching your budget, you may be eligible for some tax relief. The American Opportunity Credit replaces the existing Hope Credit for tax years 2009 and 2010. Improvements have been made to this credit to make it available to a larger group of taxpayers.
The credit is available for tuition and related course materials paid for a college student in his or her first four years of college. The old Hope Credit was only available to the first two years of post-secondary education.
The income limits have increased so that more taxpayers will qualify for the credit. The full credit is available for taxpayers whose modified adjusted gross income is $80,000 or less ($160,000 for married filing joint returns).
The amount of the credit has increased to a maximum of $2,500. This credit is equal to 100% of the first $2,000 spent and 25% of the next $2,000. So if you send $4,000 in qualified education expenses you get the full credit – which is a dollar for dollar reduction of tax owed.
You can even benefit from the credit if you have no tax liability. The American Opportunity credit is refundable up to $1,000 for each eligible student or 42% of the credit (whichever is less). The existing credit did not allow for a benefit if you had no tax liability.
If you or your student is in graduate school the American Opportunity Credit is not applicable, but the lifetime learning credit or tuition and fees deduction may still provide a benefit to you.
January 8, 2010 at 1:44am | Permalink
I have dual citizenship, but am now a resident of UK . I understand the foreign tax credit and foreign earned income exclusion portion of the US tax code. Is there any relief for Insurance charged by british government?
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This is a great opportunity for students and family members!
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Your college expenses are stretching our budget are increasing day by day. I think it can help us and we use this opportunity properly. Thanks for your opportunities!
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That’s really good news that the old hope credit was only available to the first two years of post-secondary education. Thanks
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The government raised the amount of taxes. Some of the people can’t pay for all them.
August 11, 2011 at 11:37pm | Permalink
The American Opportunity Tax Credit helps parents and students pay for college expenses under the American Recovery and Reinvestment Act (ARRA). College expenses include books, supplies and equipment needed for a course of study – regardless of where they are purchased. The annual maximum credit is $2,500 per student for those who are eligible. The credit was recently extended and can be claimed on 2009 through 2012 tax returns.
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However, your daughter would be likely be eligible for a different credit, the Lifetime Learning Credit, which is basically 20% of her costs up to a $2,000 limit. Alternately, she’d also be able to take the tuition deduction which got extended into 2009.
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