Free Money For College Students
Free Money For College Students
College. Tuition, books, housing, computer, food, etc… Sound familiar? These items are just a few of the many frequent expenses encountered in a student’s college career. The government made education credits to try and offset these expenses by giving tax benefits to them. From a tax standpoint, Education credits have usually been nonrefundable, meaning they can only reduce your tax, dollar for dollar until your tax is zero and then the remainder disappears. However, thanks to the American Recovery and Reinvestment Act of 2009 it is possible to get a REFUND through education credits. Some may have heard of the “Hope Credit” or the “Lifetime Learning Credit,” since these education credits have been around for many years.
Although not refundable, the “Lifetime Learning Credit” is not limited to a certain amount of years as other credits are, nor does it require the pursuit of a degree or educational credential. You can reduce your tax by up to $2,000 on the first $10,000 of qualified expenses. This also does not vary with the number of eligible students in a family, so if you have multiple student dependants, the expenses are combined toward the $10,000 of qualified expenses.
With the new “American Opportunity Tax Credit” you can get money back to help lift the burden of college expenses. In most situations, this credit replaces the old “Hope Credit”* and widens the scope of people who qualify for the credit. Through this credit, you can write off the first $2,000 of qualified college expenses.sup>1. Then you can take $500 of the next $2,000 of qualified expenses. This can be claimed for the first FOUR years of post-secondary education instead of the previous two years under the “Hope Credit.” So under the “American Opportunity Credit,” you have up to $2,500 to reduce your tax to zero or below, and it is available for four years of college instead of two, and 40% of the credit is refundable if you have a higher amount of credit than you have tax. That means that an amount up to $1,000 could be refunded to you.
See www.groco.com/readingroom/2009_dependentcredits.aspx for more information on the Educational Credits phase-outs, comparisons, and much more!
*Midwestern students in disaster areas can elect to apply previous rules of the Hope credit.
1 Qualified expenses include tuition, books, and mandatory fees. The American Recovery and Reinvestment Act of 2009 has also included course supplies and equipment necessary for the course of study even if they are not purchased from your school. Section 529 Education Plans also include computers and computer technology in qualifying college expenses.
We hope you found this article about “Free Money For College Students” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or our website at www.GROCO.com. Unfortunately, we no longer give advice to other tax professionals gratis.
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