The start of the New Year brings with it new opportunities and challenges. For those already in school, a new semester is about to begin. Other students and their parents are preparing and applying now to enter school in the fall. College is expensive but there are ways to cut costs. Parents and students should consider the applicable tax provisions that can affect their tax liability. With the incredible rise in college education, offsetting even a small amount now can have dramatic long-term benefits after graduation. Talk to your tax attorney for more information the tax provision that affect your unique situation.
One useful benefit is the American Opportunity Credit. This credit can help alleviate the costs of the first four years of college. Initially set to expire in 2010, the American Opportunity Credit has been extended and expanded several times and now students can take advantage of the credit until 2017. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student. 40 percent of the credit is refundable. You could receive up to 1000$ even if you own no taxes. The full credit is available to individuals, who file for 80,000 or less, or $160,000 or less for married couples filing jointly. For more information about how these credits affect your tax liability, talk to your tax attorney.
Note: Some people still refer to the American Opportunity Credit as the now defunct Hope credit. In 2009 as part of the Economic Stimulus plan, the American Opportunity Credit expanded, increased, and replaced the Hope Credit. Compared to the Hope Credit, the American Opportunity Credit has higher income limits, increases the tax credit from $1800 to $2500, increased the availability from 2 years to four, and allows credit for required books and supplies in addition to tuition and fees. It is also became 40% refundable.
The Lifetime learning Credit is also available to individuals who have expended the four years of the American Opportunity Credit. You can claim the lifetime once on each tax return indefinitely; however, it is not refundable. The credit is also limited to $2,000 rather than $2,500. You may not claim the Lifetime Learning Credit if you are also claiming the American Opportunity Credit.
Students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000 with the student loan interest deduction. This is a deduction, not a credit. It reduces the amount of income subject to taxes. As always keep careful records of all claims and deductions.
For more information about how your tax attorney can help you please contact us at 913-735-4829