Who says you can't get a break these days? The American Recovery and Reinvestment Act may give you the break you're looking for help paying for college.

The American Opportunity Credit is worth up to $2,500 of the cost of tuition and related expenses. You can claim it on your 2009 and 2010 tax returns. The credit amount starts phasing out if you make more than $80,000, or $160,000 if you're filing a joint return. Even if you don't make enough money to file a return, file anyway because you may get up to $1,000 back.

And if you have a section 529 college savings plan, you can spend those funds on a computer that's used for college.

You don't need a course in rocket science to learn how it pays to go to college.

Visit irs.gov/recovery.

American Opportunity Credit

Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify over the next two years for a tax credit, the American Opportunity Tax Credit, to pay for college expenses.

The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax.

It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student, an increase of $700 over the Hope Credit's maximum.

If the amount of the American Opportunity Tax Credit for which you're eligible is more than your tax liability, the excess credit is refundable to you, up to a maximum of 40 percent ($1,000) of the amount of the credit for which you're eligible.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

Also new: Qualified, nontaxable distributions from a Section 529 plan during 2009 or 2010 can now be used to pay the cost of any computer technology or equipment or Internet access and related services, if such technology, equipment or services are to be used by the beneficiary of the plan and the beneficiary's family during any of the years the beneficiary is enrolled at an eligible educational institution.


Publication 4772 (06-2009) | Catalog Number 53262K | Department of the Treasury Internal Revenue Service | www.irs.gov