The American Opportunity Tax Credit
The familiar Hope Credit has been temporarily replaced by the new and improved American Opportunity Credit. For your 2014 taxes, the American Opportunity Credit:
- Can be claimed in amounts up to $2,500 per student, calculated as 100% of the first $2,000 in college costs and 25% of the next $2,000.
- May be used toward required course materials (books, supplies and equipment) as well as tuition and fees.
- May be applied against four years of higher education (instead of just two years under the previous Hope Credit).
What’s more, the new tax credit is available to more taxpayers than the Hope Credit. The full credit may be claimed by people with adjusted gross income (AGI) of up to $80,000 for single taxpayers and $160,000 for married taxpayers filing jointly. The credit is gradually reduced at higher income levels. Lower-income taxpayers also benefit because up to 40% of the credit (or $1,000) is refundable, meaning that you can expect a check from the government if you owe no taxes.
For your 2014 taxes, the American Opportunity Credit continues to replace the less-generous Hope Credit will return. The nonrefundable Hope Credit provides a maximum credit of $1,800 per student, but only for the first two years of college. It phases out for single taxpayers with AGI between $50,000 and $60,000 and for married taxpayers filing jointly with AGI between $100,000 and $120,000.