The American Opportunity Credit (NEW)
The American Opportunity Credit - What is it?
The American Opportunity Credit is actually a tax credit, not a scholarship. This new education tax credit is available for 2009 and 2010. On a tax return, a tax credit is subtracted directly from total tax owed. In contrast, a deduction (i.e. mortgage interest) reduces taxable income. This tax credit may be refundable up to 40% of the credit, the rest is nonrefundable. A taxpayer can calculate and claim this credit on the IRS Form 8863 – Education Credits.
Who can claim this credit?
An individual or family can claim the credit for a student who meets the following requirements:
Is enrolled in one of the first four years of postsecondary education at any institution (the credit may be claimed in no more than four years for each student, including any year(s) Hope credit was claimed ), is enrolled in a program that leads to a degree, certificate or other recognized educational credential, Is taking at least six credit hours at GRCC for at least one academic period beginning during the calendar year, and Is free of any felony conviction for possessing or distributing a controlled substance.
The student can claim the credit if the student files his or her own tax return and claims a personal exemption. If a student is claimed as a dependent by another taxpayer, that taxpayer claims the tax credit. It does not matter who paid the tuition. The taxpayer is eligible for the maximum benefit with a Modified Adjusted Gross Income of up to $90,000 for a single taxpayer (or $180,000 for married filing jointly taxpayers in 2009). The credit amount is gradually reduced (phased-out) between $80,000 and $90,000 modified adjusted gross income for single taxpayers ( or $160,000 and $180,000 for married filing jointly taxpayers in 2009) . See IRS website for income levels applicable for 2009.
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How much is the credit?
The credit is based on the amount of tuition and qualified expenses (examples given below) paid for a student who meets the criteria defined above. In computing the credit, qualified tuition and expenses must be reduced for scholarships, grants and other tuition benefits (i.e. employer-paid tuition programs). In other words, only amounts paid "out of pocket" are eligible for the credit. Tuition and qualified expenses paid through a student loan can be applied toward the credit. The credit can be calculated based on the following:
Up to $2,500 for each eligible student who meets the requirements.
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What kind of tuition-related expenses qualify for the credit?
The following GRCC fees would be considered eligible for the credit: class lab/course fees, admission fees, general service fees, technology fees. And course-related books, supplies, and equipment which do not need to be purchased from the institution in order to qualify (these amounts will not be included on 1098T since they were not purchased directly from GRCC). The following expenses would not be considered eligible for the credit : student activities , transportation/parking, personal/family living expenses, athletic fees, transcript fees, library fees and career testing fees.
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When is the credit available?
The taxpayer may claim the credit on his or her income tax return for the year ended December 31, 2009 . The taxpayer must have paid the qualified tuition and expenses in the calendar year of 2009 . Taxpayers may claim the credit for tuition and qualified expenses paid in a tax year for an academic period that begins following the tax year (e.g., paying in December 2009 for an academic period beginning in the first three months of 2010 ).
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The Lifetime Learning Credit
Lifetime Learning Credit - What is it?
The Lifetime Learning Credit is a tax credit to individuals who file a tax return and owe taxes. On a tax return, a tax credit is subtracted directly from total tax owed. In contrast, a deduction (i.e. mortgage interest) reduces taxable income. The Lifetime Learning Credit is not refundable – it can only reduce the tax you owe to zero. A taxpayer can calculate and claim this credit on the IRS Form 8863 – Education Credits.
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Who can claim the credit? Life
An individual or family can claim the credit for a student enrolled at any enrollment level in any course of instruction at an eligible school (GRCC). The student can claim the credit if the student files his or her own tax return and claims a personal exemption. If a student is claimed as a dependent by another taxpayer, that taxpayer claims the tax credit. It does not matter who paid the tuition. The taxpayer is eligible for the maximum benefit with an Adjusted Gross Income of up to $60,000 for a single taxpayer (or $ 120,000 for married taxpayers in 2009) . The credit amount is phased-out between $50,000 and $60,000 for single taxpayers (or $100,000 and $120,000 for married taxpayers in 2009 ). See the IRS website for income levels for 2009 .
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How much is the credit? Life
The credit is based on the amount of tuition and qualified expenses (defined below) paid for a student who meets the criteria defined above. In computing the credit, qualified tuition and expenses must be reduced for scholarships, grants and other tuition benefits (i.e. employer-paid tuition programs). In other words, only amounts paid "out of pocket" are eligible for the credit. A family may claim a tax credit of up to $2,000 per year for the taxpayer, taxpayer's spouse or any eligible dependents for an unlimited number of tax years. A family may claim up to 20% of $5,000 of eligible tuition and qualified expenses paid in the calendar year 2009 . The credit is family-based. One family can claim $2,000 total per year for all eligible students of that family.
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What kind of tuition-related expenses qualify for the credit? Life
The following GRCC fees would be considered eligible for the credit: class lab/course fees, admission fees, general service fees, and technology fees (these amounts will be included on 1098T from GRCC). The following expenses would not be considered eligible for the credit: books and supplies, student activities, transportation/parking, personal/family living expenses, athletic fees, transcript fees, library fees and career testing fees.
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When is the credit available? Life
The taxpayer may claim the credit on his or her income tax return for the year ended December 31, 2009 for tuition and qualified expenses.
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Additional Information
Can a family claim the American Opportunity Credit and the Lifetime Learning Credit for the same individual?
No. You can claim both the American Opportunity Credit and the Lifetime Learning Credit on the same return – but not for the same student.
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Are there any other resources that may be useful in answering questions regarding these tax credits?
You can get good information and examples from the following Web site: