|Now more parents and students can use a federal education credit to offset part of the cost of college under the new American Opportunity Credit. This credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Income guidelines are expanded and required course materials are added to the list of qualified expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student. In many cases, the American Opportunity Credit offers greater tax savings than existing education tax breaks. Here are some of its key features:
Though most taxpayers who pay for post-secondary education qualify for the American Opportunity Credit, some do not. The limitations include a married person filing a separate return, regardless of income, joint filers whose MAGI (Modified Adjusted Gross Income) is $180,000 or more and, finally, single taxpayers, heads of household and some widows and widowers whose MAGI is $90,000 or more.There are some post-secondary education expenses that do not qualify for the American Opportunity Credit. They include expenses paid for a student who, as of the beginning of the tax year, has already completed the first four years of college. That’s because the credit is only allowed for the first four years of a post-secondary education.Students with more than four years of post-secondary education still qualify for the lifetime learning credit and the tuition and fees deduction.For details on these and other education-related tax benefits, please give us a call, or see IRS Publication 970, Tax Benefits for Education.
Ben R. Loggins
Certified Public Accountant