Information on the American Opportunity Tax Credit

The American Recovery and Reinvestment Act (ARRA) renamed the Hope Credit as the American opportunity tax credit, which covers expenses related to college fees paid in 2009 and 2010 only.

Contribution

The American opportunity tax credit contributes to $2,500 per year for four years of college costs. In contrast, the Hope Credit contributed $1,800 for the first two years only.

Expenses

The college-related expenses covered by the American opportunity tax credit include tuition and other fees and course material costs (such as textbooks and other supplies).

Eligibility

To be eligible for the American opportunity tax credit, a taxpayer must have an gross income (including income earned outside the U.S.) less than $80,000; for joint filers the limit is $160,000.

Computer

A computer is considered as part of college expenses covered by the American opportunity tax credit only if it is necessary for enrolling or attending college.

Deductions

Taxpayers cannot claim the American opportunity tax credit and the tax and tuition fee deduction in the same year. You can use tax software to find out if the credit or deduction provides greater tax savings.

References

• IRS: American Opportunity Credit
• IRS: American Opportunity Credit: Questions and Answers
• Textbook Aid: Receive a Tax Credit for Hitting the Books