American Opportunity credit replaces the Hope credit
If you need help paying for college, you’ll be glad to hear about the American Opportunity Credit. The education credit has been slightly modified and extends to 2016.
The credit provides undergraduates a dollar for dollar reduction of taxes, up to $2,500 of the first $4,000 of qualifying educational expenses. Qualified expenses have been expanded from the Hope credit rules. In addition to tuition, they included expenditures for required course materials such as books, supplies and equipment needed for a course whether or not the materials are purchased from the school.
Unlike the Hope credit, the American Opportunity Credit can be used for all four college years and is refundable up to $1,000. You can receive a refund of up to forty percent of the credit, even though you owe no tax. The full credit is available for taxpayers with modified adjusted gross income of $80,000 or less, $160,000 or less for married couples filing jointly. The credit is phased out for taxpayers with incomes above these levels.