American Opportunity Tax Credit

The American Opportunity Tax Credit is a partially refundable tax credit first detailed in Section 1004 of the American Recovery and Reinvestment Act of 2009.^[1]

The act specifies:

1. Provisions were originally specific to tax years 2009 and 2010, later extended, and finally made permanent by the Bipartisan Budget Act of 2015, for the first 4 years of post-secondary education.
2. Increases the Hope credit to 100 percent qualified tuition, fees and course materials paid by the taxpayer during the taxable year not to exceed $2,000, plus 25 percent of the next $2,000 in qualified tuition, fees and course materials. The total credit does not exceed $2,500.
3. 40% of the credit is refundable.
4. This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).

The act directs several Treasury studies:

1. Coordination with non-tax student financial assistance;
2. Coordinate the credit allowed under the Federal Pell Grant program to maximize their effectiveness at promoting college affordability;
3. Examine ways to expedite the delivery of the tax credit;
4. With the Secretary of Education, study the feasibility of requiring including community service as a condition of taking their tuition and related expenses into account.