Get Tax Refund For Going To College!
April 19, 2010 by Natasha Bright
Filed under Online Colleges
Usually, when one thinks of the 2009 stimulus act, they think of how it bailed out banks and the car industry. What they don’t realize is there was actually something written in it to reward going for advancing one’s education. A piece was added that made it possible to get a tax refund for going to college, and that refund can come to thousands of dollars. Those who are attending on campus schools, as well as taking an online college course or several, can benefit.
This new program was dubbed the American Opportunity Credit. It’s an expansion of what was previously the Hope Credit. If one attended any kind of college this last year, whether it’s brick and mortar or online, one can even apply for it this April. If you need more information about online diploma, look on the internet.
There are several key differences between the Hope and the Opportunity credits. According to the IRS, the Opportunity Credit entitles more students (and their parents) to qualify over the next two years for a tax credit to pay for college expenses, including many with higher incomes and those who owe no tax. It also adds required course materials, possibly including laptops and PCs, to the list of qualifying expenses.
Originally the limits on this credit were for individuals who made less than $48,000 and married couples who filed joint returns less than $96,000. The credit is now open to $80,000 and $160,000 or less. If one’s income(s) are $90,000 or $180,000 respectively, one can also apply, but they won’t get the maximum amounts. It cuts off when one exceeds those numbers.
How the actual credit works is that one is entitled to a 100% refund for the first $2,000 in tuition, fees and/or costs related to going for a degree. After that first $2,000, one is entitled to an additional 25% refunded up to the next $2,000. So, for example, if the costs are $6,000; one gets a 100% refund for the first $2000, 25% of the next $2,000 (or $500) and nothing for the last $2,000. $2,000 plus $500 and $0 equals a $2,500 credit when filing the following April.
One has to be careful about the “cost related” bit though. Buying a computer does not automatically make it refundable. On the other hand, if a class or school forces one to buy a laptop then it’s an item that can be claimed. There is an abundance of information about college degree on the web.
If the credit turns around and turns a tax payment into a refund, the filer gets the refund. Another important provision is if the filer is entitled to a tax refund already, i.e., without the credit, one still can get a portion of the refund as well. The only difference here is there is a cap. The filer won’t get the maximum $2,500, but at most $1,000.
It should be noted the Opportunity credit is good for only the first two years. For those planning their third year or more, one has to apply for a Lifetime Learning credit. Also, while the Opportunity credit is currently only good for the 2009 and 2010 returns, there is talk it might be extended further. For more information, check with a tax expert, a financial aid officer or go to the IRS website and look up American Opportunity Credit.
An online college course toward an accredited degree is something that can change one’s life. This refund, in addition to the online grant and scholarship opportunities out there, make good financial sense and good planning as the student takes these benefits and uses them for advancement in their lives.