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Magdalene Murphy

Bio statement Some Things You May NOT Know About the American Opportunity Tax Credit For Education

The new American Opportunity Tax Credit that was placed in force for the 2010 tax year offers a very nice credit of up to $2,500 per year for each student that qualifies. So far this credit is being used to replace the Hope Tax Credit until the 2012 tax year.

What You Probably DO Know:

This new credit has an adjusted gross income (AGI) limit that phases the credit out for single taxpayers between $80,000 up to $90,000, and for married couple between $160,000 up to $180,000 of AGI.

This credit can be used for the first four years of the students post secondary college education. The student must be enrolled in an approved program and must be at least half time student ( minimum 15 credit hours per year or 5 classes per year). You can claim this credit for qualified expense that you have paid in excess of any tax-free educational assistance that you received.

Qualifying expenses include tuition and fees, books, supplies and certain equipment needed for a course of study that was required for enrollment at an eligible institution. Eligible institutions include most colleges, universities, vocational schools or other schools that participate in the student aid programs administered by the United States Department of Education.

What You May NOT Know:

1. You can receive up to 40 percent or $1,000 per student, per year of this credit even if you do not owe any income tax. That means that this 40 percent is a refundable credit for those with lower incomes, high deductions because of large families or other tax factors.

This can be especially important for families with lower incomes that receive good financial aid, but may have a student tax return loan advance for the balance. They should be extra careful to make sure that they have their income taxes prepared professionally or by someone who understands the new education tax credits. It would be unfortunate to lose this $1,000 refund per student if you were eligible for it, but didn't know how to claim it.

2. There may be some situations where you will not want to use this new credit if you only have part-time college education costs and enrollment. If you are just starting college, but only attend part-time, your expense may be too low to qualify for the full tax credit for that tax year. If you are planning on going full-time next year, it might be a good idea to wait until you are enrolled full-time and get your full $2,500 credit for the year.

Otherwise you will lose a year of eligibility for this credit, which at $2,500 per year for four years equals a total; of $10,000. If you only get $800 for that part-time year, you have lost the other $1,700 that you could have collected.


This credit is a nice tax savings for families and students that have paid those high costs for a college education. But make sure that you take full advantage of it and if you do not understand how to file for it, hire a good tax preparer. It will save you a lot of headaches and money.

If you would like to discover more strategies to help maximize financial aid and reduce the high costs associated with college, you can download your FREE College Cost Savings Kit by clicking here. Download, print and share it with your friends or family. I'm confident it will help you to find new ways to save and get the most out of your college education... and do it all for less.

Keith Maderer is the father of five college age students, with three currently in college, and has been a financial, investment and tax adviser in Buffalo, New York since 1981. He is the author of "How To Get Your College Education For Less". Available on - ISBN No: 978-1-4538-2053-7

To get your FREE College Cost Savings Kit, visit []


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