If you are in your first four years
paid for tuition and course materials with your own funds or loans
not claimed as a dependent on another person's return
enrolled at least half time in a degree program
and was not convicted of possessing or distributing a controlled substance
and your income doesn't exceed certain limits
You will qualify for the American Opportunity Credit
For American Opportunity Credit Only
Expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution.
The law renames the Hope College credit for 2009 and 2010鈥攊t鈥檚 now known as the American Opportunity tax credit鈥攁nd hikes its value from $1,800 to $2,500 for 2009 and 2010.
Because a tax credit reduces your tax bill dollar for dollar, this basically means Uncle Sam will give you up to $2,500 per year for each qualifying college student in your family.
And, unlike the old Hope credit, which was available only for a student鈥檚 first two years of college, the new American Opportunity credit can be claimed for four years of post-high-school education. You get the maximum credit if you spend at least $4,000 in qualifying expenses, which now include the cost of books as well as tuition and fees.
More credit for lower- and higher-income taxpayers
If you're a lower-income taxpayer and the credit is worth more than your tax bill for the year, up to 40 percent of the credit (as much as $1,000) will be paid to you as a tax refund. The old Hope credit could wipe out your tax bill but never give you cash back.
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