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The American Opportunity Tax Credit is a partially refundable
tax credit A tax credit is a tax incentive which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state. It may also be a credit granted in recognition of taxes already paid or a form of state "disc ...
first detailed in Section 1004 of the
American Recovery and Reinvestment Act of 2009 The American Recovery and Reinvestment Act of 2009 (ARRA) (), nicknamed the Recovery Act, was a stimulus package enacted by the 111th U.S. Congress and signed into law by President Barack Obama in February 2009. Developed in response to the Gr ...
. The act specifies: # Provisions were originally specific to tax years 2009 and 2010, later extended, and finally made permanent by the Bipartisan Budget Act of 2015, for the first 4 years of post-secondary education. # Increases the Hope credit to 100 percent qualified tuition, fees and course materials paid by the taxpayer during the taxable year not to exceed $2,000, plus 25 percent of the next $2,000 in qualified tuition, fees and course materials. The total credit does not exceed $2,500. # 40% of the credit is refundable. # This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly). The act directs several
Treasury A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or ...
studies: # Coordination with non-tax student financial assistance; # Coordinate the credit allowed under the Federal Pell Grant program to maximize their effectiveness at promoting college affordability; # Examine ways to expedite the delivery of the tax credit; # With the Secretary of Education, study the feasibility of requiring including community service as a condition of taking their tuition and related expenses into account.


History

Originally proposed by President
Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the U ...
to help students and families pay for
post-secondary education Tertiary education, also referred to as third-level, third-stage or post-secondary education, is the educational level following the completion of secondary education. The World Bank, for example, defines tertiary education as including univer ...
, the proposal called for a $4000 credit in exchange for 100 hours of
community service Community service is unpaid work performed by a person or group of people for the benefit and betterment of their community without any form of compensation. Community service can be distinct from volunteering, since it is not always performed ...
. The stated goal of the credit was to, "cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students."


H.R.106: The American Opportunity Tax Credit Act of 2009

On January 6, 2009, Congressman
Chaka Fattah Chaka Fattah (born Arthur Davenport; November 21, 1956) is an American politician who served as a Democratic member of the U.S. House for from 1995 to 2016. The district included portions of North Philadelphia, South Philadelphia, and West P ...
introduced H.R.106, The American Opportunity Tax Credit Act of 2009. In brief, the proposed act specified # Any full-time college or university student is eligible. # According to the IRS, the American Opportunity Credit cannot be taken by a taxpayer if he has a felony drug conviction. # A $4000 refundable tax credit in exchange for 100 hours of community service. This information is not supported by the link below. This proposal was not passed. # Community service must be with either a governmental unit, hospital, or
501(c)3 organization A 501(c)(3) organization is a United States corporation, trust, unincorporated association or other type of organization exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is one of the 29 types of 5 ...
. This information is not supported by the link below. This proposal was not passed. # The Secretary of Education will be responsible for verifying community services requirements. This information is not supported by the links below. This proposal was not passed. On January 27, 2009, in the Rayburn House Office Building, Congressman Fattah convened a Congressional Roundtable, "Igniting Public Service and Securing College Access: the American Opportunity Tax Credit, H.R. 106". The panel was keynoted by Former Senator
Harris Wofford Harris Llewellyn Wofford Jr. (April 9, 1926 – January 21, 2019) was an American attorney, Civil Rights Movement, civil rights activist, and Democratic Party (United States), Democratic Party politician who represented Pennsylvania in the United ...
and included Karen Kaskey ( PennSERVE), Michelle Cooper ( Institute for Higher Education Policy), David Baime (
American Association of Community Colleges The American Association of Community Colleges (AACC), headquartered in the National Center for Higher Education building in Washington, D.C., is the primary advocacy organization for community colleges at the national level and works closely wit ...
), Quyen (Arana) Wickham ( K20 Center,
University of Oklahoma , mottoeng = "For the benefit of the Citizen and the State" , type = Public research university , established = , academic_affiliations = , endowment = $2.7billion (2021) , pr ...
), and Reginald Williams ( Benjamin Banneker Academic High School).


H.R. 4853: Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (, 124 Stat. 3296, ), was passed by the
United States Congress The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washin ...
on December 16, 2010 and signed into law by
President President most commonly refers to: *President (corporate title) *President (education), a leader of a college or university *President (government title) President may also refer to: Automobiles * Nissan President, a 1966–2010 Japanese ful ...
Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the U ...
on December 17, 2010. Among other things, the bill extends the American Opportunity Tax Credit for tax years 2011 and 2012. The Bipartisan Budget Act of 2015 made the American Opportunity Tax Credit permanent.


Related legislation

The Student and Family Tax Simplification Act (H.R. 3393; 113th Congress), a bill that passed the House on July 24, 2014, would amend the
Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 ...
to consolidate several different education tax incentives into an expanded American Opportunity Tax Credit. The American Opportunity Tax Credit, under this legislation, would provide a maximum credit of $2,500.


References

{{Reflist


External links


Internal Revenue Service's information on the credit

IRS FAQ on the credit
Personal taxes in the United States Tax credits Student financial aid in the United States Education finance in the United States Taxation in the United States