American opportunity credit.(p238)
This new education tax credit (a modification of the Hope credit) is available for 2009 and 2010. The maximum credit per student is $2,500 (100% of the first $2,000 and 25% of the next $2,000 of qualified education expenses). The credit is available for the first 4 years of postsecondary education, and 40% of the credit is refundable for most taxpayers. The threshold at which this credit is reduced is higher than that for the Hope and lifetime learning credits. For 2009, the amount of your credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). You cannot claim a credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).taxmap/pub17/p17-184.htm#en_us_publink1000221556
Eligibility for the Hope credit.(p238)
For 2009, you can claim a Hope credit only if at least one eligible student is attending an eligible educational institution in a Midwestern disaster area and you do not claim an American opportunity credit for any other student in the same year.taxmap/pub17/p17-184.htm#en_us_publink1000174560
Hope and lifetime learning credit income limits increased.(p238)
For 2009, the amount of your Hope or lifetime learning credit is gradually reduced (phased out) if your MAGI is between $50,000 and $60,000 ($100,000 and $120,000 if you file a joint return). You cannot claim a credit if your MAGI is $60,000 or more ($120,000 or more if you file a joint return). This is an increase from the 2008 limits of $48,000 and $58,000 ($96,000 and $116,000 if filing a joint return). For more information, see Effect of the Amount of Your Income on the Amount of Your Credit in Publication 970, chapters 3 and 4.taxmap/pub17/p17-184.htm#en_us_publink1000228053
Students in Midwestern disaster areas.(p238)taxmap/pub17/p17-184.htm#TXMP49b486b8
For 2009, there are three tax credits available to persons who pay expenses for higher (postsecondary) education. They are:
- The American opportunity credit,
- The Hope credit, and
- The lifetime learning credit.
The chapter will present an overview of these education credits. To get the detailed information you will need to claim any of the credits, and for examples illustrating that information, see chapters 2, 3, and 4 of Publication 970.
For each student, you can choose for any year only one of the credits. For example, if you choose to take the American opportunity credit for a child on your 2009 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2009.
If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both.
If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity and the lifetime learning credits on a per-student, per-year basis. This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year.
However, you cannot claim the American opportunity credit for one student and the Hope credit for another student in the same year. If you want to claim either of these credits for 2009, you must use the same credit (American opportunity or Hope) for all eligible students. And, in order to claim the Hope credit for any student, at least one of the students must qualify under the rules for the Midwestern disaster areas. None of the requirements in this paragraph will prevent any eligible student from claiming the lifetime learning credit.
Table 35-1. Comparison of Education Credits Caution.
If you have more than one student eligible for the American opportunity credit or the Hope credit, you must claim the same credit for all eligible students. You cannot claim both the American opportunity credit and the Hope credit on the same tax return. However, you can claim both the American opportunity credit and the lifetime learning credit, or the Hope credit and the lifetime learning credit on the same return—but not for the same student.
| || American Opportunity Credit – NEW || Hope Credit* || Lifetime Learning Credit |
| Maximum credit ||Up to $2,500 credit per eligible student ||Up to $1,800 ($3,600 if a student in a Midwestern disaster area) credit per eligible student ||Up to $2,000 ($4,000 if a student in a Midwestern disaster area) credit per return |
| Limit on modified adjusted gross income (MAGI) ||$180,000 if married filling jointly; $90,000 if single, head of household, or qualifying widow(er)||$120,000 if married filling jointly; |
$60,000 if single, head of household, or qualifying widow(er)
| Refundable or nonrefundable ||40% of credit may be refundable||Credit limited to the amount of tax you must pay on your taxable income|
| Number of years of postsecondary education ||Available ONLY for the first 4 years of postsecondary education||Available ONLY for the first 2 years of postsecondary education||Available for all years of postsecondary education and for courses to acquire or improve job skills|
| Number of tax years credit available ||Available ONLY for 4 tax years per eligible student||Available ONLY for 2 tax years per eligible student||Available for an unlimited number of years|
| Type of degree required ||Student must be pursuing an undergraduate degree or other recognized education credential||Student does not need to be pursuing a degree or other recognized education credential|
| Number of courses ||Student must be enrolled at least half time for at least one academic period beginning during the tax year||Available for one or more courses|
| Felony drug conviction ||No felony drug convictions on student's records||Felony drug convictions are permitted|
| Qualified expenses ||Tuition and required enrollment fees. Course-related books, supplies, and equipment do not need to be purchased from the institution in order to qualify.||Tuition and required enrollment fees, including amounts required to be paid to the institution for course-related books, supplies, and equipment. Additional expenses allowed for students in Midwestern disaster areas.|
| Payments for academic periods ||Payments made in 2009 for academic periods beginning in 2009 and in the first 3 months of 2010|
|* You can claim the Hope credit only if at least one eligible student is attending an eligible educational institution in a Midwestern disaster area (see Table 4-2 in chapter 4 of Publication 970 for a list of qualifying disaster areas).|taxmap/pub17/p17-184.htm#TXMP5b827eb3
There are several differences between these three credits. These differences are summarized in Table 35-1
You may want to see:
Publication 970 Tax Benefits for Education Form (and Instructions) 8863: Education Credits (American Opportunity, Hope, and Lifetime Learning Credits)taxmap/pub17/p17-184.htm#en_us_publink1000235852
You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. The credits are based on the amount of qualified education expenses paid for the student in 2009 for academic periods beginning in 2009 and in the first 3 months of 2010.
For example, if you paid $1,500 in December 2009 for qualified tuition for the spring 2010 semester beginning in January 2010, you may be able to use that $1,500 in figuring your 2009 education credit(s).
You cannot use any amount paid in 2008 or 2010 to figure your 2009 education credit(s).
An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. taxmap/pub17/p17-184.htm#en_us_publink1000235988
An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.
Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid (FSA) programs.taxmap/pub17/p17-184.htm#en_us_publink1000235854
If a student is claimed as a dependent on another person's tax return, only the person who claims the student as a dependent can claim a credit for the student's qualified education expenses. If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit.
Generally, qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Therefore, you are treated as having paid expenses that were paid from your dependent student's earnings, gifts, inheritances, savings, etc.taxmap/pub17/p17-184.htm#en_us_publink1000235855
You cannot take an education credit if any of the following apply.
- You are claimed as a dependent on another person's tax return, such as your parent's return.
- Your filing status is married filing separately.
- You (or your spouse) were a nonresident alien for any part of 2009 and did not elect to be treated as a resident alien for tax purposes.
- Your MAGI is one of the following.
- American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er).
- Hope and lifetime learning credits: $120,000 or more if married filing jointly, or $60,000 or more if single, head of household, or qualifying widow(er).
, at the end of this chapter, may be helpful in determining if you can claim an education credit on your tax return.
There are a number of factors, such as your filing status, your MAGI, and whether you are subject to the alternative minimum tax, that will affect the amount of any education credit you are eligible to claim. When you figure your taxes, you may want to compare the different education credits in order to choose the method(s) that gives you the lowest tax liability. If you qualify, you may find that a combination of credit(s) and other education benefit(s) gives you the lowest tax. See Publication 970 for information on other benefits.