March 2010 Tax Tip:
American Opportunity Credit
Included in the American Recovery and Reinvestment Act of 2009 was the creation of the American Opportunity Credit. This is an extension of the existing Hope Credit, an educational credit that helps taxpayers pay for college and related expenses. The important things to know about this credit are as follows:
- The credit is available for tax years 2009 and 2010 and can be claimed for tuition and certain fees paid for higher education
- The credit can be claimed for any of the first four years of post-secondary education
- The credit is available up to $2,500, an additional $700 more than the Hope Credit, and is based on the percentage of the cost for each eligible student
- Qualified tuition and related expenses extend to costs for required course materials, meaning books, supplies, and equipment
- The credit is based on 100% of the first $2,000 of expenses and an additional 25% of the next $2,000 in expenses
- The credit is refundable up to 40%, allowing up to $1,000 of cash back for each student
- Modified AGI must be $80,000 (Single) or less and $160,000 (Joint) or less to qualify
- The credit begins to phase out when Modified AGI exceeds $80,000 (Single) and $160,000 (Joint) and is eliminated when MAGI reaches $90,000 (Single) and $180,000 (Joint)
- Completed Form 8863 Education Credits needs to be attached to Form 1040 or Form 1040A
Questions?
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