Tax Tips & Calculators

The American Opportunity Credit is an expanded version of the Hope Credit. Although the American Opportunity Credit generally will be larger than the Hope Credit, the Hope Credit may be larger for students who attend school in a Midwestern disaster area. You can claim the Hope Credit only if you use it for all eligible students; you may not claim both the American Opportunity Credit and the Hope Credit.

Am I eligible?

If you, your spouse, or your dependent child plans to attend college, you can claim the American Opportunity Credit or the Hope Credit if he or she is:

• enrolled post-secondary education (in 1 of the first 2 years of post-secondary education — generally the freshman and sophomore years of college for the Hope Credit only; or any of the first 4 years of college for the American Opportunity Credit)
  
• enrolled in a program that leads to a degree, certificate or other recognized educational credential
  
• taking at least half the normal full-time workload for his or her course study during at least one 2009 academic period
  
• free of felony convictions for the possession or sale of illegal substances at the end of 2009
  
• didn't claim a Hope Credit in more than 1 previous tax year. (This rule doesn't apply to the American Opportunity Credit.)
  

A dependent can claim either of the credits only if the person who is eligible to claim the dependent does not claim an exemption for the dependent. The dependent can't claim a personal exemption on his or her return even if the parent doesn't claim it.

You can't claim either credit if you're married filing separately.

Important: The American opportunity tax credit is not refundable if claimed by an individual who is subject to the kiddie tax.

What are eligible expenses?

Eligible expenses include tuition, as well as fees and expenses for required books and equipment if the fees and expenses are required to be paid to the educational institution as a condition of enrollment or attendance. For the American Opportunity Credit only, eligible expenses include books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance

How much is my credit?

The American Opportunity Credit is equal to 100% of the first $2,000 of qualified expenses plus 25% of the next $2,000 of qualified expenses, for a maximum credit of $2,500 for each eligible student. Forty percent of the credit is refundable, which means you get that part of the credit even if your tax is reduced to zero. Your credit amount will be reduced if your MAGI is between $80,000 and $90,000 (between $160,000 and $180,000 if Married Filing Jointly). You can't claim the American Opportunity Credit if your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more if Married Filing Jointly).

The Hope Credit is equal to 100% of the first $1,200 and 50% of the next $1,200 of qualified expenses, for a maximum credit of $1,800 for each eligible student. Your credit amount will be reduced if your MAGI is between $50,000 and $60,000 (between $100,000 and $120,000 if Married Filing Jointly). You can't claim the Hope Credit if your modified adjusted gross income (MAGI) is $60,000 or more ($120,000 or more if Married Filing Jointly).

Note: For students attending school in a Midwestern disaster area, the Hope Credit is 100% of the first $2,400 and 50% of the next $2,400 of qualified expenses. The maximum credit is $3,600. The MAGI phase-out amounts for the Hope Credit apply.

Credit Tips

• The Hope Credit and 60% of the American Opportunity Credit are nonrefundable, so if your credit exceeds your tax, the difference isn't refunded to you.
  
• Either credit can be claimed for eligible expenses you pay for an academic period that begins during the first 3 months of the following tax year. This feature may be especially useful for students whose tuition fees fluctuate from semester to semester.
  
• You can claim either the American Opportunity Credit or Hope Credit for one or more students and the Lifetime Learning Credit for different students, but you can't claim more than one credit for the expenses of the same student. You can claim the Hope Credit only if you choose not to claim the American Opportunity Credit for any student.