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January 25, 2010

Education Credit

The American Recovery and Reinvestment Act passed in 2009 created a new tax credit which will help parents and students pay for college and college related expenses. The credit is called the American Opportunity Credit. This credit expanded the existing Hope Credit.

The credit can be claimed for tuition and qualified expenses which includes course materials. It can be claimed for any of the first four years of post secondary education. The credit is worth up to $2500 and is based on a percentage of the cost of tuition and related expenses.

Forty percent of the credit is refundable, so even those who owe no taxes can get up to $1000 of the credit for each eligible student. To be eligible for the credit your modified adjusted gross income must be $80,000 or less for single filers or $160,000 or less for joint filers.