The American Opportunity Credit, originally created under a 2009 law, has been extended for 2012. The credit can be up to $2,500 per eligible student for qualified expenses and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.

Qualified expenses include tuition and fees, course related books, supplies and equipment. What about a computer? It depends. An expenditure for a computer would qualify for the credit if the computer is needed as a condition of enrollment or attendance at the educational institution.

The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).

Students or parents paying such expenses should keep receipts that apply to college costs. You should also receive a 1099 information report from each qualified tuition program you paid into.

There may be other tax benefits available to help defray higher education expenses, such as those generated from a Section 529 plan. For more information contact any member of our Tax Services Team.

KLR’s tax professionals are CPAs and attorneys who have specialized training and experience in the Boston market place in all matters of Federal, State and Local Tax Issues. They have expertise in tax strategies for individuals and families, estate gift & trust services, voluntary disclosure issues, transfer pricing, M&A assistance, cost segregation studies and research & development tax credits. KLR is one of the top 100 accounting firms in the nation.