American Opportunity and Hope Credit

What are the Hope Credit and American Opportunity Credits? Fundamentally, they are incentives and financial breaks created by the government to help families of students going to college or the college student themselves if they are the filing party.  The Hope Credit is aimed at students who are going to a two year college, usually designed to get an Associates Degree or for trades that take two years of college, such as nursing.  The American Opportunity Credit is a aimed at those students planning at least four years of college and working toward their Bachelor degree.

The stipulations are simple. You must be actively working toward those degrees and have been taking at least half the full time workload for at least one academic period.  The maximum credit available for the students applying for the Hope credit is $1800 and for the American Opportunity Credit it is $2500.  You may claim one or the other but may not claim both.  If you live in the midwestern disaster area you may be able to get up to $3600 for the Hope Credit.

Credit Tips:

1. The Hope Credit and 60% of the American Opportunity Credit are non refundable.  This basically means if your credit exceeds your tax amount, the difference is NOT credited back to you.

2. You can claim either credit for as many dependant college students that you are claiming.  If you claim the American Opportunity Credit for one, then you must claim it for the rest that are eligible. You cannot claim the American Opportunity Credit for one and then claim the Hope Credit for the others. You can claim the Hope Credit only if you choose not to claim the American Opportunity Credit for any other student.

Essentially if you are the parents of college students and they are dependant on you, it would make sense to claim one or the other of these credits.  A credit is real money and is not to be confused with a deduction.  You can save amount of money on your owed taxes if you are eligible for either one of these credits.

History of the American Opportunity Credit: Originally proposed by President Barack Obama to help students and families pay for post-secondary education, the proposal called for a $4000 credit in exchange for 100 hours of community service. The stated goal of the credit was to, "cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students

Helpful links with more information:

Hope Credit

American Opportunity Credit