The Hope credit has been replaced by the American Opportunity credit, but is still available in the Midwest Disaster Area where the credit is double the regular credit. There are several notable differences between the Hope and American Opportunity credit: maximum credit, phase-out, eligibility, qualifying costs, and refundability. Review the list below:
- Maximum credit: American Opportunity credit (AOC): $2,500 (100% of first $2,000 plus 25% of next $2,000)per student; Hope credit (Midwest Disaster Area only): $3,600 (100% of the first $2,400 plus 50% of the next $2,400) per student; Lifetime Learning Credit (LLC): $2,000 (20% up to $10,000) per return.
- 2009 modified adjusted gross income phase out range: AOC: $80,000-$90,000 ($160,000-$180,000 MFJ); Hope and LLC: $50,000-$60,000 ($100,000-$120,000 MFJ)
- Eligibility: AOC: enrolled at least half-time for first 4 years; Hope: Enrolled at least half-time for first 2 years; LLC: Enrolled in any qualifying course.
- Refundable: AOC: 40%, max: $1,000; Hope and LLC: No.
- Qualifying Costs: AOC: Tuition, required fees, and course materials; Hope: Tuition, required fees, books, supplies, equipment, plus room and board if at least half-time; LLC: Tuition and required fees only (Midwest Disaster Area includes more).
For most people, the phase out will determine which credit to apply. As always, check with your friendly accountant for your personal tax situation.