Eligible taxpayers 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.Credit Helps Pay for First Four Years of College. Tax credits/deductions are now avalable to broader range of tax payers as income guidelines have been expanded.
Max annual credit of $2500 will be allowed. In addition to tuition,related fees, Books will also be eligible for tuition/credit deductions . Credit will be 100 percent for first $2000, and 25 percent for next $2000.
Full credit is available for taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less ($160,000 or less for filers of a joint return). The credit is reduced or eliminated for taxpayers with income above these levels.
Forty percent of the American opportunity credit is refundable. This means that even people who owe no tax can get an annual payment of the credit of up to $1,000 for each eligible student.
The refundable portion of the credit is not available to any student whose investment income is taxed, or may be taxed, at the parent’s rate, commonly referred to as the kiddie tax. See Tax Rules for Children and Dependents. for details: See Publication 929
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 is $180,000 or more and, finally, single taxpayers, heads of household and some widows and widowers whose MAGI is $90,000 or more.
Students with more than four years of post-secondary education still qualify for the lifetime learning credit and the tuiti0n and fees and deduction.
For details on these and other education-related tax benefits, see Publication 970, Tax Benefits for
Link :American Opportunity Credit.
