Expanded Hope Scholarship Credit,
The American Opportunity Credit

For 2011 and 2012, an enhanced version of the Hope scholarship tax credit, called the American Opportunity Tax Credit is still available. The amount of the credit is 100% of the tuition and related expenses paid by the taxpayer during the tax year for education furnished to the eligible student during any academic period beginning in the tax year up to $2,000, and 25% of the next $2,000 of the same expenses, for a maximum credit of $2,500 on expenses of $4,000. Qualified expenses are the same as for purposes of the Hope scholarship tax credit, except that they include course materials, whether or not they are required as a condition of enrollment.

The American Opportunity credit is allowed for 4 taxable years per student, and for the first 4 years of post secondary education at an eligible educational institution.

Like the Hope credit, the American Opportunity credit is phased out for taxpayers with modified adjusted gross income (AGI) over a threshold amount. The deduction is phased out over a $10,000 range that begins when modified AGI is more than $80,000 ($160,000 if married filing a joint return).  No deduction is allowed when modified AGI is equal to or more than $90,000 ($180,000 if married filing a joint return). 

Unlike the Hope credit, the American Opportunity credit is allowed against the alternative minimum tax (AMT) even in years in which most personal tax credits are not. In addition, 40% of the credit is refundable -- that is, it can reduce the taxpayer's tax liability below 0. However, no portion of the credit is refundable for any taxpayer that is subject to the kiddie tax.

For post-secondary education credits, you will need to furnish the following: