Income Tax Credits

Income Tax Credits

American Opportunity Credit| Lifetime Learning 

The American Opportunity Credit

The American Opportunity Tax Credit modifies the existing Hope Credit for tax years 2009 and 2010 under ARRA. The credit was extended to apply for tax years 2011 and 2012 by the Tax Relief and Job Creation Act of 2010. The new credit makes the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

To claim this credit, the student must be enrolled at least half-time in a program leading to an undergraduate degree.

For more information on eligibility and claiming of the American Opportunity credit, consult IRS publication 970, entitled Tax Benefits for Education.

Lifetime Learning Tax Credit

This credit is available for all years of postsecondary education and for courses (even a single course) to acquire or improve job skills.

  • The Lifetime Learning credit can only be used for tuition and fees. The credit can be claimed for 20 percent of the amount you pay (see maximum limits below).
  • A taxpayer may claim a tax credit for 20% of up to $10,000 in a combination of tuition and fees.  This equates to a $2,000 tax credit in 2009.
  • The amount of the credit begins to phase out if your AGI is between $50,000 and $60,000 for a single return and between $100,000 and $120,000 for a joint return.

For additional more detailed information please consult IRS Publication 970 titled Tax Benefits for Education.

Tax Benefits for Education - IRS Information Center

Deductions, savings plans, and tax credits can help taxpayers with their educational expenses.  Please visit the IRS website for more information by clicking here.

 

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