Obama’s new hope & lifetime learning credit changes

August 11, 2009


For the years 2009 and 2010, the following changes have been made to
the Hope credit. The modified credit is also referred to as the
American Opportunity Tax Credit.

The maximum amount of the Hope credit increases to $2,500 per
student. The credit is phased out (gradually reduced) if your
modified adjusted gross income (AGI) is between $80,000 and $90,000
($160,000 and $180,000 if you file a joint return).

Exception. For 2009, if you claim a Hope credit for a student who attended a school
in a Midwestern disaster area, you can choose to figure the amount of
the credit using the previous rules. However, you must use the
previous rules in figuring the credit for all students for which you
claim the credit.

The Hope credit can now be claimed for the first four years of
post-secondary education. Previously the credit could be claimed for
only the first two years of post-secondary education.

Generally, 40% of the Hope credit is now a refundable credit, which
means that you can receive up to $1,000 even if you owe no taxes.
However, none of the credit is refundable if the taxpayer claiming
the credit is a child (a) who is under age 18 (or a student who is at
least age 18 and under age 24 and whose earned income does not exceed
one-half of his or her own support), (b) who has at least one living
parent, and (c) who does not file a joint return.

The term "qualified tuition and related expenses" has been expanded
to include expenditures for "course materials." For this purpose, the
term "course materials" means books, supplies, and equipment needed
for a course of study whether or not the materials are purchased from
the educational institution as a condition of enrollment or

For 2009, the amount of your lifetime learning credit is phased out
(gradually reduced) if your modified adjusted gross income (AGI) is
between $50,000 and $60,000 ($100,000 and $120,000 if you file a
joint return). You cannot claim a lifetime learning credit if your
modified AGI is $60,000 or more ($120,000 or more if you file a joint

  • Please consult with your tax professional or CPA before implementing any strategy.

If you need help or have any questions on how you're going to pay the upcoming astronomical costs of college, please contact us, your local AZ College Consulting firm. We can help you through several different scenarios options and help determine which is right for you.

   Send article as PDF   

Comments are closed.