Financing your education can be expensive. However, there is a new tax credit available only for 2009 and 2010 that replaces the old Hope Tax Credit. The latest American Opportunity Tax Credit will allow more families to take advantage of education tax credits. This new piece of legislation was created into law last February as a part of the American Recovery Reinvestment Act, which was designed by the Obama administration to help jump-start the straggling economy.

In order to qualify for the new American Opportunity Tax Credit on your 2010 taxes, you needed to have taken the following steps in 2009:

- attend at least half-time seeking a degree, certificate, or credential and pay higher education expenses such as tuition, fees, books and supplies (room and board is not a qualifying expense).

- be a student or have a qualifying dependent, such as a spouse or child (stepchild included).

- not exceed the income threshold

Want to know if your income is suitable to receive a tax break?

Single individuals receive full tax credit unless their adjusted gross income exceeds $80,000. Partial credit is available if the 2009 income is greater than $80,0000 but less than $90,000. The income cutoff for the tax credit is $90,000.

If you’re married, a full tax credit is available for couples who earn up to $160,000. Partial credit can be received for those who earn up to $180,000 with a modified adjusted gross income.

If you’re scratching your head wondering what a modified adjusted gross income is, listen up! For most people, it’s simply the adjusted gross income, but for others it includes all earnings including wages, tips, and investment income minus contributions to workplace benefits, retirement programs, dependent care accounts, and health savings accounts.

If you qualify for the tax return credit, fill out Form 8863 on your 2010 federal tax return, and be sure to keep all receipts for your records!

Like any IRS procedure, there are rules, limitations, and regulations that apply to the American Opportunity Tax Credit, so be sure to read the instructions and fine print!