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What is an American Opportunity Credit?Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify over the next two years for a tax credit, the American opportunity credit, to pay for college expenses.The American opportunity credit is not available on the 2008 returns taxpayers are filing during 2009. The new credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and lifetime learning credits.Special rules apply to a student attending college in a Midwestern disaster area. For tax-year 2009, only, taxpayers can choose to claim either a special expanded Hope credit of up to $3,600 for the student or the regular American opportunity credit.
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The American Opportunity Credit is a refundable tax credit for undergraduate college education expenses. It is a tax credit of up to $2,500 of the cost of qualified tuition and related expenses paid during the taxable year. That is a $700 increase from the previous Hope credit The American Recovery and Reinvestment Act specify that: 1. Provisions are specific to tax years 2009 and 2010 for the first 4 years of post-secondary education. 2. Increases the Hope Scholarship Credit to 100 percent qualified tuition, fees and course materials paid by the taxpayer during the taxable year not to exceed $2,000. 3. 40% of the credit is refundable. 4. This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000
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