2009 and 2010 American Opportunity Education Credit and Deductions

Created by Congress this new temporary credit to cover the years 2009 and 2010.
This is a better version of the Hope Credit for education.
The maximum will be $2,500.00. The income eligibility restrictions are better now.
Previously the Hope credit was for two years but this new program will cover the 4 years. Students have to be enrolled at least half-time.

40 Percent of the credit is refundable even if it is more than you owe.

The student has to have spent at least $4,000.00 in qualified expenses to get the maximum credit. That would include tuition and fees as well as course materials and books. If an individual has a modified adjusted gross income over $80,000.00 or for couples filing jointly $160,000.00 the credit begins to not apply.

And here's a good one:

Tuition Deduction of up to $4,000.00 toward higher education and fees. It's good if you itemize or take the standard deduction within the income eligibility limits. The deduction for tuition and fees can't be claimed if you or anyone else claims an education tax credit for that student in the same year.

To clear up a point:
A deduction reduces the income used to figure your taxes.
A credit, reduces actual taxes owed.

Interest on a student loan:
A maximum $2,500.00 deduction can be taken for interest paid on student loans. A qualifying individual's modified adjusted gross income must be less than $75,000.00 with an income limit on a joint return at $150,000.00

Business deduction for work-related education: The course or class must be required by your employer for your present job or be related to it for you to qualify.
Under this you can't deduct education expenses incurred to train for a new position. You would deduct the cost of education related to your job in the miscellaneous column of your itemized deductions.
To take the deduction, the total of all miscellaneous deductions must exceed 2 percent of your adjusted gross income. People who are self-employed would be able to subtract the expense from their income.

A worker or self-employed person who takes courses to acquire or improve job skills may qualify for the lifetime learning credit.

Times are changing and computers the internet is becoming recognized as a learning tool.
Something that will affect parents and students for tax years 2009 and 2010 is that money may be withdrawn from a tax-free college savings or prepaid tuition plan to cover the cost of internet access, software and computers while the student is in college.
Distributions under the 529 plans are not taxed.

For more detailed tax information go to www.irs.gov