The American Opportunity Credit replaces the Hope Scholarship Credit. It is available for the first four years of college, or other postsecondary school that lead to a recognized educational credential (the HOPE credit was only for the first two years of undergraduate school). It does not apply to graduate-level courses.
The maximum credit has increased to $2,500 per student for each year, and 40 percent of the credit is refundable, which means you can receive up to $1,000 even if you owe no taxes.
Also, "qualified tuition and related expenses" are now expanded to include books, supplies, and equipment needed for a course of study even if the materials are not purchased from the educational institution as a condition of enrollment or attendance.
The credit phases out if your modified adjusted gross income is between $160,000 and $180,000 (married filing jointly) and $80,000 and $90,000 (other filers).
This credit is allowed against the alternative minimum tax (AMT).
American Opportunity Credit at a glance:
- Replaces Hope Scholarship Credit
- Applies to first four years of college/ postsecondary school
- $2,500 per student per year
- Phase-out ranges are $160,000 to $180,00 (married filing jointly), or $80,000 to $90,000 (other filers)
- Allowed against AMT