What is the American Opportunity Tax Credit?
The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $2,500 for out of pocket higher
education expenses for course materials, tuition, and fees in 2009 and 2010. The Credit is applied for by using
form 8863.
The instructions may be found
here.
The Internal Revenue Service has released its Publication 970 for the 2009 tax year.
Publication 970 provides
detailed information, useful examples and guidance on all of the educational benefits of the tax code, including the new
American Opportunity Tax Credit. If you have more specific questions, we strongly encourage you to consult the financial
aid office of your institution, a qualified tax advisor or legal professional, or the IRS about your unique situation.
What course materials are eligible for the tax credit?
The ARRA specifies that "required" course materials are eligible for the tax credit as well as tuition and fees that have not
been paid for by grant or scholarship aid. In other words, you may not receive a double benefit for your qualified
expenses. Qualified education expenses include amounts spent on books, supplies and equipment required for a course of study. As a practical
matter, it would be fair to assume that any purchased course materials identified as required and listed on a course book
list for your registered classes would likely qualify for the tax credit.
What necessary documentation will we need for the tax credit?
According to the IRS, taxpayers should retain adequate documentation to prove education-related expenses, such as
transcripts or course descriptions that show periods of enrollment, list of course materials for your classes, cancelled
checks, and receipts that verify the amounts spent on tuition, books, supplies, and equipment used in a course of study.
IRS Publication 552 (Recordkeeping for Individuals) addresses this issue.
Still have questions or need additional information?