LEWISTOWN - The Internal Revenue Service reports that many parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit. The tax credit is part of the American Recovery and Reinvestment Act of 2009.
The IRS offers the following facts about the American Opportunity Tax Credit:
1. The credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that students and parents pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course materials.
2. The credit is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000 per student each year. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.
3. The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return. The credit is gradually reduced, however, for taxpayers with incomes above these levels.
4. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.
5. The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.
6. Students and parents cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. They must choose to either take the credit or the deduction.
For more information visit the IRS's Web site at www.IRS.gov/recovery.