The Hope Credit was given a boost under the American Recovery and Reinvestment Act of 2009. The changes are so good that the credit has been renamed. For 2009 and 2010 the popular education credit will be known as The American Opportunity Credit.
For the next two years the American Opportunity Credit will be available to certain taxpayers who would not usually qualify for the Hope Credit. The credit will phase out between $80,000 and $90,000 in income for single filers, and between $160,000 and $180,000 for taxpayers filing jointly, up from $48,000 and $58,000 (single) and $96,000 and $116,000 (joint) for the Hope Credit.
While the Hope Credit was allowed for the first two years of higher education expenses only, the new credit can be claimed for the first four years of undergraduate work. In addition, expenses paid for books supplies, equipment and other required course materials that were not considered qualifying expenses for the Hope Credit will be allowed for calculating the American Opportunity Credit. The enhanced credit maxes out at $2,500 per student, up from $1,800 for 2008, and forty percent of the credit is now refundable, so even if you do not owe any taxes, you can receive up to $1,000 back as long as the student is not subject to Kiddie Tax.
This new credit could save you a lot of money in taxes, but can sometimes be confusing as to how it exactly works for your specific situation. Consider becoming a TaxAudit.com member and use our TaxHotline service. Our qualified tax professionals are available to answer your tax questions as they pertain to your situation.
This information is being provided to the taxpayer as required by the Internal Revenue Service and follows the guidelines for best practices for tax advisors per Circular 230 §10.33(a)(1-4), and §10.35(b)(2), (8), and (10). This written statement may be considered to be a “covered opinion” as defined by the Internal Revenue Service. This statement(s), along with subsequent correspondence, is not intended or written to be used, and cannot be used by the taxpayer, for the purpose of avoiding lawful penalties that may be imposed on the taxpayer by the Internal Revenue Service. The principal purpose of any stated tax advice included here has as its purpose to claim tax benefits in a manner consistent with the statutes and Congressional intent.