Education Tax Credits (Hope and Lifetime Learning Credits)
For tax years 2009 and 2010, there is a new education credit called the American opportunity tax credit (AOC).
This is a modification of the Hope Credit.
- The maximum amount of the AOC is $2,500 per student. The credit is phased out (gradually reduced) if your modified adjusted gross income (AGI) is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). Exception. For 2009, if you claim a Hope credit for a student who attended a school in a Midwestern disaster area, you can choose to figure the amount of the credit using the previous rules. However, you must use the previous rules in figuring the credit for all students for which you claim the credit.
- The credit can be claimed for the first four years of post-secondary education. Previously the credit could be claimed for only the first two years of post-secondary education.
- Generally, 40% of the AOC is now a refundable credit for most taxpayers, which means that you can receive up to $1,000 even if you owe no taxes.
- The term “qualified tuition and related expenses” has been expanded to include expenditures for “course materials.” For this purpose, the term “course materials” means books, supplies, and equipment needed for a course of study whether or not the materials must be purchased from the educational institution as a condition of enrollment or attendance.
Income limits for Hope and lifetime learning credit reduction increased. For 2009, the amount of your Hope or lifetime learning credit is phased out (gradually reduced) if your modified adjusted gross income (AGI) is between $50,000 and $60,000 ($100,000 and $120,000 if you file a joint return). You cannot claim a Hope or lifetime learning credit if your modified AGI is $60,000 or more ($120,000 or more if you file a joint return).
Eligibility for the Hope credit. For 2009, you can claim a Hope credit only if at least one eligible student is
attending an eligible educational institution in a Midwestern disaster area and you do not claim an American opportunity credit for any other student in the same year.