Effective for tax years beginning in 2009 through 2012, the Hope Scholarship Credit is modified to allow, among other changes, a higher credit amount that can be claimed by a broader spectrum of taxpayers. The modifications are entitled the American Opportunity Tax Credit, as added by the American Recovery and Reinvestment Tax Act of 2009 , and amended by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. All other requirements for the Hope Scholarship Credit not specifically amended, as discussed below, are retained for 2009 through 2012 (e.g. definitions of an eligible student and an eligible education institution).
Qualified tuition and related expenses have been expanded to include expenditures for course materials. Course materials means books, supplies, and course materials needed to take the class. For example if you’re in art class and you need paint, brushes, sketch books and so on. It doesn’t matter where you purchase the items from either. You can save yourself some money by purchasing them on sale at a big box store. You do not have to purchase the course related materials from the educational institution.
The tax credit is partially refundable. If the taxpayer does not have sufficient tax liability to fully offset the tax credit, up to 40% of the amount of the tax credit may be refunded to the taxpayer. For example, if the taxpayer has $4,000 in education expenses (enough for a $2,500 tax credit) but only $1,500 in tax liability, the taxpayer may obtain the remaining $1,000 tax credit as a refund. This means that low income families who have no tax liability may file an income tax return to obtain a refund of up to $1,000 from the Hope Scholarship tax credit.
Filed Under: Education Tax Credit