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Laura Cheeld Day, CPA, CDFA

Tax and accounting services for small businesses and individuals

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Education Credits
The federal government may help pay your (or your children's) college expenses with the American Opportunity Credit. The American Opportunity Credit modifies and expands the Hope credit.
The credit provides undergraduates a dollar-for-dollar reduction of federal taxes, up to $2,500 of the first $4,000 of qualifying educational expenses. Qualified expenses have been expanded from the Hope credit rules. In addition to tuition, they include expenditures for required course materials such as books, supplies and equipment needed for a course whether or not the materials are purchased from the school.
Unlike the Hope credit, the American Opportunity Credit can be used for all four undergraduate years and is refundable up to $1,000. You can receive a refund of up to forty percent of the credit, even if you owe no tax.
The full credit is available for taxpayers with modified adjusted gross income of $80,000 or less, $160,000 or less for married couples filing jointly. The credit is phased out for taxpayers with incomes above these levels.