This bill consolidates four existing tax credits for higher education expenses into a single tax benefit. The four provisions in question — the Hope Credit, the American Opportunity Tax Credit (AOTC), the Lifetime Learning Credit, and the tuition deduction — would all be rolled into a new AOTC that would be permanently extended. This new credit would:
- offer a 100-percent tax credit for the first $2,000 of eligible higher education expenses and a 25-percent tax credit for the next $2,000 of such expenses (for a maximum credit of $2,500).
- make the first $1,500 of the credit refundable, meaning that families could receive the benefit whether or not they have Federal income tax liability.
- be available for up to four years of post-secondary education at qualifying four-year universities, community colleges, and trade and vocational schools and could be used for offsetting expenses for tuition, fees and course materials.
- restore income eligibility limits provided by the Hope Scholarship Credit.