People often say a college education is the best investment a person can make, but with the costs of tuition, books and supplies rising fast, you have to wonder if it’s an affordable one anymore. While the government and IRS rarely, rarely get any praise, one seldom mentioned program we think does deserve attention is the American Opportunity Tax Credit.
For 2009 and 2010, the AOTC has a lot more bite than its predecessor, the Hope Education Tax Credit. First, the IRS raised the maximum amount of the credit from $1,800 to $2,500 per student, and the credit can now be claimed for the first four years of post-secondary education, rather than only the first two years. Second – and this is huge – is that the credit can now be used for “course materials,” which include books, supplies and even course study equipment such as a laptop for business majors or a digital camera for aspiring photojournalists.
The credit begins to phase out (gradually reduce) if your gross income is between $80,000 and $90,000 ($160,000 to $180,000 for joint filers), and 40 percent of the credit is now generally refundable, meaning you still receive up to $1,000 even if you owe no taxes.
So while college and, “The best eight years of your life,” generally aren’t free, ol’ Uncle Sam is ready to lend a hand – for the first four at least.
For more information on taking advantage of the American Opportunity Tax Credit or your personal tax strategy, please contact an associate at Wendroff & Associates at 703-553-1099. Also, please look out for our upcoming Technical Solutions: QuickBooks Online Advanced Webinar, which will feature advanced QuickBooks Online techniques and an open Q&A with the CPA. The webinar will be totally free, and you can attend from your office or home computer.