As the tax season comes to a close, we hope you have learned from our series on taxes and we also hope you have finished up your taxes on time. If not, come on into Check City and we can still help you make sure you get your return postmarked by the 15th. We have one more blog for you about taxes. This one will especially help those college students who are still learning all about taxes and preparing their own as independents for the first or second time. With Obama in office, there has been a new Education Credit awarded to those who are paying for college tuition. As a student this is a good credit to understand so that you can get more back on your taxes.
American Opportunity Credit:
The American Opportunity Credit is the first of the education credits we will discuss. This is a credit for up to $2,500 for each student. This credit can help lower the cost of the first four years of college. You can claim the credit for 100% of the first $2,000 paid and 25% of the next $2,000 paid, totaling $2,500. 40% of this credit is refundable, meaning that even if you don’t owe any taxes to the government, you could still receive up to $1,000 of the credit. Their are income requirements for this credit,but they are broader and less restricting than the Hope and Lifetime Learning Credits. You can claim this credit as long as your income does not exceed $80,000 and for married couples, it phases out between $160,000 and $180,000. This credit can also help pay the fees for books and other costs associated with attending a university.
Who this helps: This credit is especially helpful to low income families who struggle to be able to afford sending their children to college. It could also help out higher income families who are ineligible for other education tax credits.
Hope and Lifetime Learning Credits:
The Hope and Lifetime Learning Credits may seem obsolete after reading the American Opportunity Credit details, because the income levels are more restricted as well as the fact that they offer less assistance, but there are still students who may benefit more from this credit. For instance, those who attended school in a disaster area in 2009 got a special $3,600 credit and can receive this credit for the first two years of their education. Making this more profitable for them. This credit however has a much lower income limit at $50,000 to $60,000 and you can’t claim any two of these credits in the same year. For students outside of disaster areas, the Lifetime Learning Credit will offer them 20% of the first $10,000 in qualifying expenses, which excludes scholarships and grants, etc.
Who this helps: Students attending school in disaster areas and meeting the income requirements should claim this credit. But families with multiple children may want to consider just taking the American Opportunity Credit for all of their children, because once they waive it for one, they are required to waive it for all.
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