American Opportunity Tax Credit
Update November 9, 2011 — This page has been updated to reflect the fact that the American Opportunity Tax Credit, which was to expire at the end of 2010, was extended for an additional two years through December 2012 by the Tax Relief and Job Creation Act of 2010.
Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify for a tax credit, the American Opportunity Tax Credit, to pay for college expenses.
The American Opportunity Tax Credit modifies the existing Hope Credit for tax years 2009 and 2010 under ARRA. The credit was extended to apply for tax years 2011 and 2012 by the Tax Relief and Job Creation Act of 2010. The new credit makes the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.
The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.
Questions and Answers
If you still have questions about the American Opportunity Tax Credit, these questions and answers might help.
IR-2009-78, Special IRS Web Section Highlights Back-to-School Tax Breaks; Popular 529 Plans Expanded, New $2,500 College Credit Available