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2015 Federal Budget – Extending the American Opportunity Tax Credit

The American Opportunity Tax Credit is a College Tuition benefit. Specifically, Taxpayers may claim an AOTC for 100 percent of the first $2,000 plus 25 percent of the next $2,000 of qualified tuition and related expenses (for a maximum credit of $2,500) per student.

This is not a deduction, but a credit, in effect, you are being handed $2500 towards the first $4000 in college expenses. As with many such benefits, this one is phased out for singles with AGI from $80K to $90K and for joint filers with AGI from $160K to $180K.

The AOTC overlapped with the Hope credit and Lifetime Learning Credit, each of which comes with its own set of rules.

This proposal eliminates the sunset rule, making the AOTC ‘permanent.’

A good change, if it passes. Come back tomorrow, time to put a close to this series.

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