The new tax deal has given the $2,500 a year American Opportunity Tax Credit (AOTC) permanent life instead of expiring at the end of 2017. The credit reduces your federal tax bill dollar-for-dollar by up to $2,500 per year for each eligible college student for whom you pay qualified tuition expenses. It can be claimed on behalf of an undergraduate for four years—that’s a $10,000 tax subsidy, over four years. And if you have more than one child in college at the same time, you can claim more than one credit.

This break had been set to expire at the end of 2017, after the fiscal cliff deal extended it for tax years 2013-2017. The new (December 2015) tax deal makes the credit permanently available, and that is good news for parents trying to pay for the high cost of college. The tax deal also made computers, iPads and tablets a qualified expense under 529 college savings plan rules.

The American Opportunity Tax Credit is worth more than the older college-related tax credits you might have heard of: the Hope Scholarship and Lifetime Learning Credits. It’s also more valuable than another tax break, the tuition and fees deduction. But understandably, having all of those credits creates a lot of confused taxpayers and leads some to miss out.

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