American Opportunity Tax Credit
The Hope scholarship tax credit was created by the Taxpayer Relief Act of 1997. Earlier this year, the American Recovery and Reinvestment Act of 2009 (Recovery Act) effectively replaced the Hope tax credit with the American opportunity tax credit, which is available in 2009 and 2010. With the new credit, taxpayers who pay at least $2,000 for tuition, fees, books and materials for higher education can get a dollar-for-dollar tax credit, saving $2,000 in tax. Above $2,000, the tax credit is 25 cents on the dollar. When a taxpayer reaches $4,000 of expenses, he or she will qualify for the maximum credit of $2,500.