Sunday, May 09, 2010

What is the American Opportunity Education Credit?

Earlier this week the RDTC Tax Help Blog posted a great new article explaining the American Opportunity Education Credit (AOEC), which was introduced through President Obama's American Recovery and Reinvestment Act. Check out the article below.

Expansion of the Hope Credit

Although the name is new, the American Opportunity credit is actually just an expansion of the highly popular “Hope Scholarship” credit. The former credit could only be claimed for two years (up to $1,800) to pay for tuition and other school related expenses. However, the expanded AOEC can be claimed for up to four years, or up to $2,500.

Credit Amounts

The most each student can claim is $2,500. Taxpayers can claim 100 percent of the first $2,000 in qualified educational expenses, and then 25 percent of the next $2,000 for a total of $2,500.

Allowed Expenses

The most common qualifying expenses are tuition fees and related expenses. Students can also claim other expenses depending on their individual studies. For example you could include the cost of a computer in your credit amount only if it was a requirement for a class. Likewise, you could claim the costs of a textbook if it was required reading by one of your professors. If you are unsure about a specific expense then you should speak with a qualified tax professional who can examine your unique financial situation.

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