This year under the “American Recovery and Reinvestment Act of 2009”, we have a new credit called the American Opportunity Tax Credit. This credit will expand and rename the Hope Credit which could be used to offset the first two years of post high school education costs.

This credit is to be used for tuition and related expenses including fees, books and other required course materials. It is for 2009 and 2010 costs only.

The credit is equal to 100% of the first $2,000 spent and 25% of the next $2,000. Therefore, you will be entitled to the entire credit of $2,500 if you spend at least $4,000 in qualifying costs. However, it starts to phase-out for married couples with adjusted gross incomes over $160,000 and singles over $80,000. You can claim this credit for the first four years of post secondary education.

Forty percent (40%) of the credit is refundable, so even if you owe zero tax, you might be able to receive up to $1,000 in actual refund.

 
This information is provided in an effort to help you gather and organize the information necessary to file your individual or small business income tax return. While these financial tools are not a substitute for financial advice from a qualified professional, they can be used as a starting point in your decision making process.