The American Opportunity Tax Credit, the new federal education tax credit, is available for both 2009 and 2010, according to a reminder by Jim Krudwig, director of the Small Business and Technology Development Center at the Robert W. Plaster School of Business Administration at Missouri Southern State University-Joplin. The maximum credit per student is $2,500, which amounts to all of the first $2,000 spent and one-quarter of the next $2,000 of qualified education expenses, and this credit reduces the amount of tax owed rather than a tax deduction which only reduces the amount of income subject to tax.

A modification of the Hope credit, the American Opportunity Tax Credit may be claimed by the student or the parents of a dependent student with modified adjusted gross income of $90,000 for single, head of household or qualifying widow(er) filers ($180,000 if married filing jointly). Students, without felony drug convictions, pursuing a post secondary college/university education enrolled at least half time for at least one academic period that begins during the tax year (minimum six credit hours at MSSU), may claim the deduction for the first four years.

Addressing the issue of whether a refund would be given to a filer who owed no taxes, Krudwig said, "forty percent of the credit may be refundable." For example, if a filer spent $2,000 on eligible tuition and owed no federal taxes, then the filer would receive a refund check for $800.

In answer to the question, "I did my taxes and did not know about the tax credit last year, what can I do?", Krudwig said that an amended return may be filed to capture the credit. For further information about the credit, go here.

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