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American Opportunity Tax Credit
Thanks to the American Recovery and Reinvestment Act of 2009 (ARRA), the Hope Credit has been expanded and renamed the American Opportunity Tax Credit. The American Opportunity Tax Credit is now available for the first four years a student is enrolled in post-secondary and
are carrying at least a half-time workload while pursuing an undergraduate
degree, certificate, or other recognized credential.
The American Opportunity Tax Credit is
available to eligible taxpayers on a per-student basis if you have
qualified expenses paid in the current tax year as a student enrolled at or attending an
eligible educational institution. You cannot claim credits if your
filing status is married and filing separately or you are claimed as a
dependent on another person's tax return (such as your parents’
return). The full amount of the American Opportunity Tax Credit is available to
married taxpayers filing jointly with an adjusted gross income (AGI) of
$180,000 or less and to single taxpayers with an AGI of $90,000 or less.
Married taxpayers with a combined AGI of $180,000 or greater (and single
taxpayers with an AGI of $80,000 or greater) are ineligible for this credit.
The amount that may be claimed as a
credit is generally equal to: (1) 100 percent of the first $2,000 of the taxpayer’s out-of-pocket expenses for each student’s qualified tuition and related expenses; plus (2) 25 percent of the next $2,000 of
the taxpayer’s out-of-pocket expenses for each student’s qualified
tuition and related expenses. Thus, the maximum credit a taxpayer may
claim for a taxable year is $2,500 multiplied by the number of students
in the family who meet the eligibility requirements described above.
Qualified tuition and related expenses are tuition and fees a student
must pay to be enrolled at or attend an eligible educational
institution. Qualified tuition and related expenses has been expanded to now include course materials (books, supplies, equipment) whether or not they are purchased from an eligible institution as a condition of enrollment. Also, new for 2010, up to 40% of the American Opportunity Tax Credit is now refundable. This means that even if you owe no taxes, you may still qualify to have a portion of the American Opportunity Tax Credit refunded.
The following are not qualified tuition
and related expenses: (1) amounts paid for any course or other education
involving sports, games or hobbies (unless the course or other education
is part of the student's degree program); (2) charges and fees for room,
board, student activities, athletics, insurance, books, equipment,
transportation (and similar personal, living or family expenses). Please
refer to the "Definitions" under "Education Tax Information"
portion of the www.tcrs.com
Web site to verify that your expenses qualify. If you or the student
claim a deduction for higher education expenses, such as on Schedule A
or Schedule C (Form 1040), you cannot use those expenses when figuring
your education credits. Also, higher education expenses paid with a
tax-free scholarship, Pell Grant or employer-provided educational
assistance cannot be used when figuring your education credits. Eligible
expenses for this credit are offset by scholarships, grants, and other
tax-free tuition benefits. Nonresident aliens generally are ineligible
to claim the American Opportunity Tax Credit.
If the taxpayer is claiming a Lifetime Learning Credit
for a particular student, none of that student’s expenses for that
year may be applied toward the American Opportunity Tax Credit.
For more information about the American Opportunity Tax Credit, call the IRS at 1-800-TAX-1040 or visit their web
site at .
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