American Opportunity Tax Credit—Credit set to end in 2010

The American Opportunity Tax Credit is basically a renaming of the existing Hope Scholarship Tax Credit. A credit of up to $2,500 for the first 4 years of higher education expenses would be available. The credit would be calculated based upon 100% of the first $2,000 of qualified tuition and related expenses, plus 25% of the next $2,000 of such expenses. The credit would begin to phase out at $80,000 of modified AGI (adjusted gross income) for a single taxpayer and $160,000 for married taxpayers. Up to 40% of the credit would be refundable, meaning that you can get a credit that is more than your tax liability.

The American Opportunity Tax Credit would also be allowed for the Alternative Minimum Tax. The credit is only available during the 2009 and 2010 tax years, unless Congress extends this credit.