Back to School on Education Credits - Tax Tip of the Week

For the last several years you have had the choice of using the Hope Education Credit, the Lifetime Learning Credit, or the Tuition and Fees Deduction to help defray higher education expenses.For 2009, the new American Opportunity Credit will replace the Hope Credit for most taxpayers.  The new credit has several advantages over the Hope Credit:

• If filing a joint return, you will not be phased-out of using this credit until your AGI exceeds $180,000.  The Hope Credit phased-out at $116,000.
• The maximum credit you can take is $2,500 vs. $1,800 under the Hope Credit.
• You can now include the cost of books and other fees, including tuition, to maximize the credit.  (You only need $4,000 in qualified expenses to receive the maximum credit.)
• This credit is available for the first four years of post-secondary education vs. the first two years under the Hope Credit.
• Even if you have no tax liability, up to 40% of the credit is now refundable.

The rules of the Lifetime Learning Credit and Tuition and Fees Deduction have not changed.  You still need to look at all three education credits when preparing your return to make sure you optimize the best option.Good luck to the student in your family!Call us with any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com....until next week.