Six Facts About the American Opportunity Tax Credit
Six Facts About the American Opportunity Tax Credit
Many parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit. This tax credit is part of the American Recovery and Reinvestment Act of 2009.
Here are six important facts the IRS wants you to know about the new American Opportunity Tax Credit:
This credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course Materials.
The credit is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000 per student each year. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.
The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return. The credit is gradually reduced, however, for taxpayers with incomes above these levels.
Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.
The American Opportunity Tax Credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.
You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction, which ever is more beneficial for you.
Complete details on the American Opportunity Tax Credit and other key tax provisions of the Recovery Act are available at the official IRS Web site at IRS.gov/Recovery.
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See Lynn Thomas’ Recent Interview with Alan Olsen: https://youtu.be/0VFOWFl3wqk Lynn Thomas has been helping clients unlock success, one idea at a time by executing tailored client presentations that deliver extraordinary client experiences. Her firm specializes in creating and implementing plans based on new tax laws and the ever-changing market research. Lynn connects with her clients…
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Transcript Alan Olsen Welcome to American Dreams. I’m here today with Lynn Thomas. Lynn, welcome to today’s show. Lynn Thomas Thank you for having me on. I’m delighted to be here. Alan Olsen So Lynn, for the listeners, you have a remarkable career. I think you started out with Arthur Andersen. Lynn Thomas Yes, I…