"American Opportunity Tax Credit"

Six Facts About the American Opportunity Tax Credit

Many parents and college students will be able to offset the cost of
college over the next two years under the new American Opportunity Tax
Credit. This tax credit is part of the American Recovery and
Reinvestment Act of 2009.

Here are six important facts the IRS wants you to know about the new
American Opportunity Tax Credit:

1. This credit, which expands and renames the existing Hope Credit,
can be claimed for qualified tuition and related expenses that you pay
for higher education in 2009 and 2010. Qualified tuition and related
expenses include tuition, related fees, books and other required
course Materials.

2. The credit is equal to 100 percent of the first $2,000 spent and
25 percent of the next $2,000 per student each year. Therefore, the
full $2,500 credit may be available to a taxpayer who pays $4,000 or
more in qualifying expenses for an eligible student.

3. The full credit is generally available to eligible taxpayers who
make less than $80,000 or $160,000 for married couples filing a joint
return. The credit is gradually reduced, however, for taxpayers with
incomes above these levels.

4. Forty percent of the credit is refundable, so even those who owe
no tax can get up to $1,000 of the credit for each eligible student as
cash back.

5. The credit can be claimed for qualified expenses paid for any of
the first four years of post-secondary education.

6. You cannot claim the tuition and fees tax deduction in the same
year that you claim the American Opportunity Tax Credit or the
Lifetime Learning Credit. You must choose to either take the credit or
the deduction, which ever is more beneficial for you.

Complete details on the American Opportunity Tax Credit and other key
tax provisions of the Recovery Act are available at the official IRS
Web site at IRS.gov/Recovery.