Click here to read about this credit and the 2009 stimulus package.
The American Opportunity Tax Credit is currently being proposed by President Barack Obama. The purpose of this tax credit would be to make college more affordable by directly reducing the amount of money a person owes in taxes. Typically, these off-setting tax credits are viewed as more favorable than income-reducing tax deductions.
The current amount being proposed is $4,000. If no taxes are owed, this credit will be fully-refundable, which means a family could actually receive up to $4,000 from the government, even if they owe no taxes.
The American Opportunity Tax Credit is meant to offset 2/3 of the costs of a four-year public college education, and would effectively make community college free for most students.
This credit is also supposed to be "immediately" refundable, which would ensure the family receives the funds at the time of enrollment. The mechanics of this have yet to be fully explained.
There is no word yet whether the American Opportunity Tax Credit would eliminate the Hope Scholarship or Lifetime Learning credits.
