College Tax Credit for 2009, 2010
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For 2009-2010 only, Congress enacted a new college tuition tax credit:
The American Opportunity Tax Credit
- worth up to $2,500
- for single filers with income below $80,000 (partial credit for those between $80,000 and $90,000) and joint filers with incomes below $160,000 (partial credit for those between $160,000 and $180,000)
- 100% of the first $2,000 in qualified tuition and related expenses; and
- 25% of the next $2,000 in qualified tuition and related expenses
- for the parents of a dependent student or for the student if not claimed as a dependent
- 40% of the credit ($1,000) is refundable
After 2010, the college tax credit scene reverts to the old ones:
There's the Hope Tax Credit or there is
The Lifetime Learning Credit
- worth up to $2,000
- for single filers with income below $48,000 (partial credit for those between $48,000 and $58,000) and joint filers with incomes below $96,000 (partial credit for those between $96,000 and $116,000)
- 20% of the first $10,000 in qualified tuition and related expenses
- for the parents of a dependent student or for the student if not claimed as a dependent
- may be used for college tuition at any level (part-time, also)
Education tax credits will also be subtracted from your income (taxed and untaxed) on your FAFSA next year.
Federal College Tax Credits FAQs
Which college expenses can be used to claim the credit?Expenses that are required for enrollment or attendance at an eligible school, such as:
- tuition
- fees (only if mandatory)
- books (whether bought at the school store or not)
- supplies that are necessary for a course of study
- equipment that is necessary for a course of study
- any expense that the school mandates as a condition for attendance
What if expenses were paid with college loans?
You can take the credit- even if the loan is deferred until after graduation.
What about college grants and scholarships, such as a Pell grant?
If the grant or scholarship is tax-free (as a Pell grant is) you cannot use the portion of expenses paid by that award to figure the credit. If you had expenses beyond the award amount, use that portion for the credit.
What is the time frame allowed to claim a college tax credit for 2009?
You may claim the credit for expenses paid in 2009 for college classes that began in 2009 or the first three months of 2010. So if you paid in December for the spring semester of 2010- that counts.
For more specific answers to tax questions about your individual situation, you can consult a professional tax expert, here.
The Tuition and Fees Deduction
If you choose, you can claim an education tax deduction instead of a college tuition tax credit.- worth up to $4,000 off your income
- for single filers with income below $80,000 and joint filers with incomes below $160,000
- for the parents of a dependent student or for the student if not claimed as a dependent
- may not be used for any expenses other than tuition and fees (like room and board)
Usually a college tax deduction is used when your income is too high for a higher education tax credit. A school tax credit reduces the amount of taxes you pay and an education tax deduction reduces your income. (thereby lowering the amount of taxes you pay, but not as much)
Want the American Opportunity Tax Credit Extended?
Tell why you think this credit should be extended past 2010. How will this help you?
I'll send a link to these comments to the U.S. Congress Joint Committee on Taxation.
Let your voice be heard!
Other Voices
Click below to see contributions from other visitors to this page...
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The new college tax credit should be included in your budgeting calculations for the 2010 and 2011 school years. This is money that you can put towards your tuition and reduce your future college loan debt.And to get the most financial aid you can qualify for, learn about this year's FAFSA, before you fill it out.
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