1. The Hope credit has been renamed the “American Opportunity Education Tax Credit” for the 2009 and 2010 tax year.
2. The maximum credit amount has been increased from $1,800 to $2,500 per year, per student.
3. This includes 100 percent of eligible expenses up to $2,000 plus 25 percent of expenses above $2,000. Total eligible expenses would have to reach $4,000 to reach the maximum credit amount.
4. More low-income and upper-middle income families will qualify. Adjusted gross income up to $160,000 for married couples or $80,000 for single parents. Income higher than these levels will receive a phased out credit as income levels rise.
5. 40 percent of the credit will be refundable to families that owe no income tax. Students can claim the credit as well if they provide more than half of their own support.
6. Those students and families that have used their eligibility under the old Hope credit will be able to claim the new expanded Hope limits today. The new law allows students and parents to covers a 4 year period.
7. Required course materials can now be counted in addition to tuition and student activity fees. Previously, the cost of textbooks could not be counted in computing the credit. This can contribute significantly to students that did not use up all of the credit while attending school online or part time.
8. The credit can’t be claimed against the following sources:
a. 529 Plans
b. Tax free Scholarships
c. Pells Grants
d. Coverdell Education Savings account (ESA)
e. Employer provided education assistance
f. Military educational assistance
g. Any other tax free educational assistance
9. Only one of these credits/deductions can be selected, per student:
a. The New American Opportunity Education Tax Credit
b. The existing $2,000 Lifetime Learning tax credit
c. The $4,000 above-the-line deduction
10. The New American Opportunity Education Tax Credit is the best of the three as it is a higher credit than the Lifetime Learning tax credit and a $4,000 deduction at most provides $1,400 in relief.
11. 529 savings accounts are now allowed to pay for computers, computer-related technology and Internet access for beneficiaries.
12. The Pell Grant will be increased from $4,731 to $5,350 starting July 1st, 2009. This is the largest increase in history and will get an additional 800,000 students into the Pell Grant Program.
13. In 2010 and 20111 the Pell Grant will be increased to $5,550.