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Tax Credit Student

Starting with the 2009 tax year, the student tax credit formerly known as the Hope Credit is now the American Opportunity Tax Credit. Along with a name change comes a change in value as well: the credit was hiked from $1,800 to $2,500.

Basically, this means Uncle Sam will give you $2,500 for each qualifying college student in your family. There are some other changes as well. You might have known that the Hope Credit was only available during the first two years of enrollment. Now the American Opportunity Tax Credit is effective through four years of enrollment.

If you qualify as a lower income taxpayer and the credit exceeds your tax bill for the year, up to 40% of the credit or $1,000 will be paid directly to you as a refund.

The credit decreases starting with single taxpayers making $80,000 a year and disappears at $90,000. For the married taxpayers the thresholds are now $160,000 and $180,000. And don’t worry, if you’ve already used the Hope Credit for the first two years of education, you can still use the American Opportunity Tax Credit for the junior and senior years.

How to qualify:

The student must be enrolled at least half time in a program pursuing an undergraduate degree or other recognized educational credential. The credit can be claimed for expenses paid by your spouse, yourself, or your parents if you are claimed as a dependent for tax purposes.

The changes in the Hope Credit do not affect the Lifetime Learning Credit which is used for higher education.

When using an online tax service such as TurboTax Online you’ll find that they weigh the different options for college tax credits and automatically choose the one that works best for you in your particular tax situation. You can skip all the research and let an award winning service with a 100% guarantee do the research