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American Opportunity Tax Credit Details
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CNNMoney has broken down the details of the latest stimulus package and has the following to say about the American Opportunity Tax Credit, which was a refundable credit pushed heavily by Pennsylvania Representative Chaka Fattah (D):
New temporary college credit: The bill introduces the American Opportunity Tax Credit, which would be in effect for 2009 and 2010. It expands the existing Hope Scholarship tax credit and would be worth as much as $2,500 for higher education expenses, up from $1,800 currently.
The full credit would be available to those making less than $80,000 ($160,000 for joint filers). Those making between those amounts and $90,000 ($180,000 for joint filers) would get a partial credit. And the break would also be partially refundable, meaning lower income families with little or no tax liability could now claim some of the credit. Estimated cost: $13.9 billion.
The stimulus package also has another education related tax break, the Pell Grant has been increased to $5,350 for 2009 and $5,550 for 2010; an increase of $500 in both cases.
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My parents claimed me all through college but I don’t think they knew they could take advantage of these credits. Maybe they did and I didn’t know about it.
That being said, does this new adjustment to the tax credits for education really make a big difference? I see what she was trying to accomplish, but this isn’t really going to help that many people make the final decision to attend college or not.
The economic stimulus benefits are almost null, short term especially. I’d like to see what Fattah’s justification was.
I claimed you because it gives me a $3500 duduction. The useless Hope credit is only for parents who make less than 116000/year. We make more than that,lucky for you, so we get $0 for the credit. Thanks but no thanks obama!
BTW – weakonomist, get a job and pay your own tuition like your mom and i did at a major University. weak? yes!.
Just so you know this new tax credit is for families who make less than 160,000/year and if you make more than that and can’t afford it then you need help with your finances because i’m 27 and i can afford college with a baby and me and my wife making 60,000.
I’m with you Michael. I’m 27 as well and a single mom of boys, ages 3 years & 5 years. I put myself through college, graduating with my Associates in the Spring of 2009. I’m even holding down the house while my boyfriend returns back to school for his final 2 years. To top it all off, I bring in less than $25K a year, so I don’t want to hear a single yelp that someone bringing in over $100K is having issues!
some of us could only dream of making over 100,000. The sad truth is that you are worried about not benefiting from this act yourself when you can obviously afford everything you need. This Act will help those of us like myself who work 40 hours a week for $8.50 and hour and ARE trying to improve our lives so that we can make more money. Don’t always be so blind to others, stop thinking about yourself all the time.
I’m struggling to put my son through college, my single biggest expense right now, and bigger Pell grants and a bigger tax break is good news indeed. You’re right, weakonomist, it wouldn’t have made the different between his going or not going but it lessens the load a little bit. I’m grateful for any help I can get!
Hopefully the lawmakers will read and understand everything in this bill and the impact it will really have. Apparently many haven’t read the 1000+ page bill.
Very few Congressmen read bills. They have staffers that try to but few understand them or read them completely. This is normal business.
saladdin
In fact, many Congressmen (and women) not only don’t read the bills, they often turn to lobbyists to write them.
I will give 1 Saladdin internet dollar to whoever can name what led to the first paid lobbyist (according to some experts)in our US history.
saladdin
VA vets hired William Hull in 1792 to lobby for more lewt.
I hadn’t heard this yet. This is good news that I’ll for sure be able to use. Thanks for sharing!
Jim,
I haven’t read anything about whether or not this scholarship can be used for graduate school. I know the Hope Scholarship is one-time only… so for those of us who claimed it in the past and are in grad school are we SOL?
Tom,
Do you mean hope credit or hope scholarship? Totally different things.
saladdin
Hope Tax Credit
You need to recheck that. The Hope is not a one time deal. You may be able to amend past returns. See a tax dude.
saladdin
this can not be used for graduate school
I read this morning that there will be a higher education tax credit. Parents of college students would be eligible to claim a tax credit of up to $2,500 – which is up from it’s current $1,800.
Tom,
You received some bad info about the Hope Credit. It’s definitely not one-time only. However, it only covers expenses from the first two years (worth) of undergrad. They mean in terms of credits, not actual years, so for instance someone doing one course per semester doesn’t lose the credit until they’ve finished the equivalent of sophomore year — even if that takes a decade. There’s more info here:
http://www.irs.gov/publications/p970/ch02.html
Carina,
There is a hope credit and a hope scholarship. 2 different things. The hope scholarship is a lottery funded scholarship (for certain states like the Great State of Tennessee) but is only available for undergrad.
I don’t know if tom is talking about the credit or scholarship but he did use the word scholarship. We may be talking two totally different things.
saladdin
Money for college is good and all, but how does this stimulate the current recession we are in? the answer is, it doesn’t. Students are consumers in society, not producers. The impact of this won’t be felt for years, and as such we will already be out of the recession.
Based on your argument that students are consumers, giving their families extra money will increase their consumption and thus boost the economy. You don’t gain anything by giving producers money because they produce based on demand.
I know you used the word “current” thomas but the majority of the money in this bill won’t hit the economy for over a year. This bill has long term and short term stuff mixed together.
This part of the bill is not for students. It is to create more disposable income for those that are financing tuition and to create more tax revenue in the years to come. Even the pell grant increase means parents will subsidize less tuition which means more money in their pocket to spend on cars or crack.
For the future though, higher educated people typically have higher paying jobs, which means paying more taxes.
saladdin
Saladdin – I will not spend this extra money on either cars or crack. I promise!
Promises, promises.
To say that everyone that doesn’t have a high paying jonb is going to spend it on cars or crack has to be the most crackhead person I have ever heard of> what are your reasons or your statistics for claiming this nonsense? I swear some of you people live in lala land. Most of us have had to bust our asses go to school or to even put up a small business that doesn’t make enough money because of people thinking like you who got us into this mess. I finally have some money to go to school for free…hallelujah! now i can finish my damn BA without having to work a full time job. Its about damn time considering all of europe gets higher education for free. I think you have your head up your ass and thats why it looks liek everyone is smokign crack. if you look outside and get real maybe you’ll see there’s alot of good people trying to do the best they can while the elite are trying to get rich off of us. asshole.
quick-fixes are what put us into this mess, thomas.
So, this is just an extension of the Hope Tax Credit, correct? So if you have already claimed the Hope Credit for your first two years of college, and are now claiming the Lifetime Learning credit, this doesn’t affect you at all?
Ok I have a question..
I come from a low income family and I am a college sophmore. My mom is a single parent w/ 4 kids so I’ve basically been working since I was able to and take care of myself. For the past 2 yrs my mom hasn’t claimed me on her taxes I’ve collected my own and im 19 now. does that mean I will not qualify for this tax credit since she doesnt claim me??
I need a clearer understanding of how this works.
As a student paying your own way you can claim this credit on your tax return for four years as long as you do not make more than 80K per year.
I”ll have two in college this coming fall and just exceed the $160,000 couples income qualification. Will we be able to take advantage of this program? One of my sons will be a freshman and the other a senior who desires to go to graduate school in the following year. With one other son, who finished college last year, we haven’t known of any programs to offer us any tax relief. Now we’ve taken on an additional debt of $125,000.
See a Certified Financial Planner
Could I apply for this if I file taxes ‘married filing separately’? If this is a continuation of the Hope credit, I don’t think I’m allowed to. I’d like $2500 for a paralegal course.
Any advice is apreciated!
I remember when this was first proposed the idea was to give the credit in exchange for 100 hours of community service. Is that true of the officially released credit as well?
So…… in a nut shell….. the hope credit is a deduction on parent’s taxes with an eligible student up to $2500 total or a year? And what is an eligible student? Someone with good grades or is it like a form that you have to submit or is it a tax relief to those in need of financial aide?
My Congressman, the grand Zach Space sent me an advertisemnt (that I paid for) that he got me an additional $2500 for my child’s college education. As usual, not! It is an additional $700 on top of the existing $1800 Hope Scholarship. I wish false advertising laws applied to Congressmen. Or, at least, the media would ferret out these self-aggrandizing Congressmen and expose them for what they are.
I am confused about this. Was this credit actually passed and who is eligible? I am currently in graduate school, does this apply to me also? I have a daughter also in school who will be entering her 3rd year of college. I don’t think I have ever taken tax credits for school.
I need to know if a person is eligible to claim this credit if they have already claimed the Hope Credit??
And also do they really have to work 100 hours of community service??
We have two kids in college. A 1st year pharmacy and the 2nd attending a community college. Helping your kids through college is the greatest (but most expensive gift we could give them). A huge issue is all the college expenses that are not allowed to be claimed for the few tax credits; college books not purchased from the bookstore – ebay or Amazon is a more affordable option; An alotted deductible amount for living expenses for students who cannot communte and attend year round which makes the dorms not an affordable option; internet service for online classes; class required uniforms for medical field students; ect.! Another huge issue is when students are forced to provide parent tax returns in cases where the parents aren’t helping pay for college, and refuses to provide the information or is causes the student not to recieve any Fin Aid, some states demand that students be claimed until they are 24 as dependents.
The American Opportunities Credit is really a two-year beef up and extension of the Hope Credit. It extends it to the first 4 years of college (undergrad). And it ups the credit potential from $1800 to $2500. It also covers books and laptops, which Hope did not.
Even better that that, say your tax liability is $1,000. You have $2500 worth of expenses. You can take off your tax liability of $1,000 and then get a refund of up to 40% of $1500. That makes the credit somewhat “refundable.”
I’m in the Jackson Hewitt tax course this fall and we just talked about this. Not sure about married filing separately. I would always check the IRS publication or talk to a tax preparer. Now that I’m taking the class, I see how much support they have in terms of materials.
This new American Opportunity tax credit replaces the Hope credit for 2009 and 2010 tax years. Can be up to $2500 for first 4 years of undergrad (Hope credit was 2 years). Limits and qualifications similar to Hope credit apply.
Other good news I have not seen mentioned is this credit and the lifetime credit are both doubled, yes doubled, if you go to a school in the designated “Midwestern Disaster Area” and Hurricane Ike. States listed are Arkansas, Illinois, Indiana, Iowa, Missouri and Nebraska. Ike affected states are Texas and Louisiana. Not all counties in these states are included so you must check if your school qualifies. If you attended school in these states check at IRS.GOV under Midwestern Disaster Area. Best wishes from HR BLOCK.