As we all know, college is expensive. Previously, the federal government allowed families to claim a tax credit for college expenses (Hope credit). Families can now claim the similar American Opportunity credit on their federal income tax returns.
Details from the Higher Education Coordinating Board below:
American Opportunity tax credit may help offset college expenses
OLYMPIA- Students and families who had tuition and other college-related expenses in 2009 may be eligible to claim the American Opportunity tax credit when they prepare their federal income tax returns this year.
The full tax credit, which can be claimed for college expenses incurred during the 2009 and 2010 tax years, is available to taxpayers whose modified adjusted gross income is $80,000 or less ($160,000 or less for joint filers). A reduced credit amount is available to taxpayers with adjusted gross incomes up to $90,000 ($180,000 for joint filers). If a taxpayer’s income level was not high enough during the year to incur federal income tax liability, up to 40 percent of the tax credit can be received as a refund.
American Opportunity replaces a similar tax credit provision called the Hope credit. The new credit of up $2,500 for tuition and eligible college expenses is higher than under the Hope provision. In addition, tax filers may now claim expenses incurred during the first four years of their post-secondary education rather than only the first two.
Depending on individual circumstances, the American Opportunity tax credit may not be the most advantageous tax option for all families with higher education expenses. For guidance, consult a tax expert or visit the HECB website (www.hecb.wa.gov/Paying/payingresources/AmTaxCredit.asp) for links to additional information from the Internal Revenue Service.
