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American Opportunity Credit

Who Can Claim the Credit

Generally, you can claim the American opportunity credit if all three of the following requirements are met:

  • You pay qualified education expenses of higher education.
  • You pay the education expenses for an eligible student.
  • The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.

A Few Facts

  • The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses.
  • This credit provides up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses.
  • The tax credit is scheduled to have a limited life span: it will be available only for the years 2009 through 2017, unless Congress decides to extend the credit to other years.

Details of American Opportunity Credit

  • Taxpayers will receive a tax credit based on 100 percent of the first $2,000, plus 25 percent of the next $2,000, paid during the taxable year for tuition, fees and course materials.
  • The American Opportunity credit applies to all four years of undergraduate college education. The credit is gradually reduced (or “phased out”) for income from $80,000 to $90,000 (or $160,000 to $180,00 for joint filers).
  • The tax credit is not available for people with incomes above the phase out range.
  • Up to 40% of the credit is refundable(upto $1000), meaning that it can generate a refund larger than the amount of payments you made.

Qualified & Non-qualified Expenses

In general, qualified expenses for the education tax credits include tuition and required fees for the enrollment or attendance at an eligible post-secondary educational institution. For this purpose, the term “course materials” means books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.

The following expenses do not qualify:

  • Room and board.
  • Transportation.
  • Insurance.
  • Medical expenses.
  • Student fees unless required as a condition of enrollment or attendance.
  • Same expenses paid with tax-free educational assistance.
  • Same expenses used for any other tax deduction, credit or educational benefit.
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