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.
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