4. American Opportunity Tax Credit
Introduced as part of Obama's 2009 stimulus plan, the American Opportunity Tax Credit aims to help lower-income families pay for college. It replaced the Hope Credit and allows qualifying families to claim up to $2,500 each year for four years.
Obama made the credit 40% refundable, meaning a family that qualifies for the full $2,500 can receive $1,000 of the credit in cash and the rest must be applied toward their tax liability. That refundable $1,000 is especially important for low-income families, since they often don't have big enough tax bills to apply a non-refundable credit. Often, the refundable amount is the only portion they receive.
But the American Opportunity Tax Credit is scheduled to revert to the Hope Credit. At that point, the maximum credit will drop to $1,800. Also, families will only be able to claim the credit for two years and it will no longer be refundable.