There are multiple education and child tax benefits available for 2009.  Information on these benefits is discussed below.

HOPE Credit and Lifetime Learning Credit: Significant changes are in place for the HOPE credit for 2009, including a name change to the American Opportunity Tax Credit. The maximum HOPE credit for 2009 is $2,500 (100% on the first $2,000, plus 25% of the next $2,000) for qualified tuition and fees paid on behalf of a student (i.e., the taxpayer, the taxpayer's spouse, or a dependent) who is enrolled on at least a half-time basis. The credit is available for the first four years (rather than two as in past years) of the student's post-secondary education. For 2009, the credit is phased out at modified AGI levels between $160,000 and $180,000 for joint filers, and between $80,000 and $90,000 for other taxpayers. Forty percent of the HOPE credit is refundable, which means that you can receive up to $1,000 even if you owe no taxes. The term “qualified tuition and related expenses” has been expanded to include expenditures for “course materials” (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 attendance).  The Lifetime Learning credit maximum in 2009 is $2,000 (20% of qualified tuition and fees up to $10,000). A student need not be enrolled on at least a half-time basis so long as he or she is taking post-secondary classes to acquire or improve job skills. As with the HOPE credit, eligible students include the taxpayer, the taxpayer's spouse, or a dependent. For 2009, the Lifetime Learning credit is phased out at modified AGI levels between $100,000 and $120,000 for joint filers and between $50,000 and $60,000 for single taxpayers.

Coverdell Education Savings Account: For 2009, the aggregate annual contribution limit to a Coverdell education savings account is $2,000 per designated beneficiary of the account. This limit is phased out for individual contributors with modified AGI between $95,000 and $110,000 and joint filers with modified AGI between $190,000 and $220,000.  Contributions can not be made to the account once the beneficiary has reached the age of 18, unless the beneficiary is a special needs beneficiary.  The contributions to the account are nondeductible but the earnings grow tax-free.

Student Loan Interest: You may be eligible for a deduction for student loan interest paid on any “qualified education loan.” The maximum deduction is $2,500. The deduction for 2009 is phased out at a modified AGI level between $120,000 and $150,000 for joint filers, and between $60,000 and $75,000 for individual taxpayers.

Child Tax Credit: A tax credit of $1,000 per qualifying child under the age of 17 is available on the 2009 return. In order to qualify for 2009, the taxpayer must be allowed a dependency deduction for the qualifying child. One new qualifying determination is that the qualifying child must be younger than you. The credit is phased out at a rate of $50 for each $1,000 (or fraction of $1,000) of modified AGI exceeding the following amounts: $110,000 for married filing jointly; $55,000 for married filing separately; and $75,000 for all other taxpayers. A portion of the credit may be refundable. For 2009, the threshold earned income level to determine refundability is $3,000.

Credit for Adoption Expenses: For 2009, the adoption credit limitation is $12,150 of aggregate expenditures for each child, except that the credit for an adoption of a child with special needs is deemed to be $12,150 regardless of the amount of expenses. The credit ratably phases out for taxpayers whose income is between $182,180 and $222,180.

For more information on these tax benefits, please contact one of our tax professionals.