Six Facts About the 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.
Here are six important facts the IRS wants you to know about the new American
Opportunity Tax Credit:
- This credit, which expands and renames the existing Hope Credit, can be
claimed for qualified tuition and related expenses that you pay for higher
education in 2009 and 2010. Qualified tuition and related expenses include
tuition, related fees, books and other required course Materials.
- The credit is equal to 100 percent of the first $2,000 spent and 25
percent of the next $2,000 per student each year. Therefore, the full $2,500
credit may be available to a taxpayer who pays $4,000 or more in qualifying
expenses for an eligible student.
- The full credit is generally available to eligible taxpayers who make
less than $80,000 or $160,000 for married couples filing a joint return. The
credit is gradually reduced, however, for taxpayers with incomes above these
- Forty percent of the credit is refundable, so even those who owe no tax
can get up to $1,000 of the credit for each eligible student as cash back.
- The credit can be claimed for qualified expenses paid for any of the
first four years of post-secondary education.
- You cannot claim the tuition and fees 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.
Complete details on the American Opportunity Tax Credit and other key tax
provisions of the Recovery Act are available at the official IRS Web site at