Congress has made the tuition credits much more generous in 2009, making the credits 100% of the tuition and fees you pay (up from 50% in prior years). It also extended the time that you can take the more generous credit from just your first two years of college, to the first four years.
More Details:
- The Credit is known as the American Opportunity Tax Credit
- It can offer as much as $2,500 in credits to qualified households
- It is available in 2009 and 2010
- The student cannot be beyond the first four years of postsecondary education (so if you already have been to college or gotten a degree and are returning for a second degree you don't qualify - take the lifetime learning credit).
- You get a dollar-for-dollar reduction in your federal tax bill equal to 100 percent of the first $2,000 in "qualified tuition and related expenses" and 25 percent of the next $2,000.
- The credit phases out for incomes between $80,000 and $90,000, and between $160,000 and $180,000 for joint filers.
- If a parent's income is above the phase-out range, but the dependent student's income is not, the credit can be claimed on the student's federal tax return provided the parent agrees to forego the dependency exemption.
- It is partially refundable - those in lower-income brackets could receive up to 40 percent of the credit as a refund.
- While the Hope and Lifetime Learning Credit only include tuition and fees, this new American Opportunity Credit also includes course materials (i.e. books).
Source
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