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American Opportunity Credit
This tax credit, which has been extended through 2017, is available for up to $2,500 of college tuition and related expenses (but not room and board) paid during the year. The full credit is available to individuals whose modified adjusted gross income is $90,000 or less ($180,000 or less for married couples filing a joint return). The credit is phased out for taxpayers with incomes above those levels.
The American Opportunity Credit is juicier than the old Hope Credit--it has higher income limits and bigger tax breaks, and it covers all four years of college. And if the credit exceeds your tax liability (whether derived from the regular income tax or the alternative minimum tax), up to 40% of it is refundable. For example, suppose you owe $1,900 in federal taxes and qualify for the full credit. The nonrefundable portion of the credit will reduce your tax bill to $400, and the first $400 of the refundable portion will lower your bill to zero. You'll receive the remaining $600 as a tax refund.
-1,900 => +600, what a deal, huh?
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