American Opportunity Tax Credit

The American Opportunity Tax Credit helps students and parents pay for college expenses.

In 2009 the American Recovery and Reinvestment Act, also known as the Stimulus, expanded the existing Hope Credit for the years 2009 and 2010 into the American Opportunity Tax Credit. The credit was later expanded to include the 2011 and 2012 tax years as well.

The American Opportunity Tax Credit allows more students and parents to qualify for what was formerly the Hope Credit. Now many with higher incomes and even those who don’t owe any tax may qualify. In addition, course materials were added to the list of qualifying expenses.

The credit amounts to 100% of the first $2,000 spent on tuition, fees, and course materials and 25% of the next $2,000 spent. Thus, the full credit of $2,500 is available to those who pay $4,000 or more in qualifying expenses. Note that only expenses for the first four years of post-secondary education qualify for the credit.