Details of American Opportunity Tax Credit Bill
The new American Opportunity Tax Credit is a modification of the existing Hope Credit for tax payers. The difference for the newly proposed bill is that more parents and students can avail of the said tax credit. Originally, the American Opportunity Tax Credit was good only for 2years – 2009 and 2010. But President Barack Obama has already proposed to make the bill permanent if passed.
The American Opportunity Tax Credit is not available for the 2008 returns that the taxpayers filed in 2009. The new credit makes the old Hope Credit available to more taxpayers, even those in the higher income brackets and those whose salaries do not make them qualified to pay taxes.
There are qualifying expenses that are covered by the American Opportunity Tax Credit. One of them is the required course materials. The credit can be claimed for four years of post-secondary education. Most of those eligible can qualify for the maximum allowable annual credit of $2,500 per student.
The full credit can be applied by those whose modified adjusted gross income is equal to $80,000 or less for individuals, or $160,000 or less for married couples with a joint return.
The new credit is also partially refundable. This means that if a family doesn't earn enough to pay income taxes, they will get $1,000 back. A family which is required to pay for instance an annual income tax of let’s say $2,000 will qualify for the full $2,500 credit amount. The $2,000 tax payable will be erased and they will still get the amount $500 being a refundable credit.