White House Pushes to Extend College Tuition Credit

The popular American Opportunity Tax Credit helped an estimated 12 million college students pay for their education. The popular credit is set to expire at the end of the year, however the President has suggested extending the credit to continue helping students who cannot afford to pay for college.

CNN Money.com reports:

The American Opportunity Tax Credit helped soften the blow of college tuition for more than 12 million students last year, but it's due to expire at the end of this year unless President Obama gets his way.

To remind Congress of the importance of extending the credit, top government advisers spoke to reporters Wednesday about why they believe the break is worth keeping around.

"[Obama] believes that it is important for this to be extended and for families to have the certainty and confidence that this [credit] will be there when they are making the choices about sending their children to college," said Gene Sperling, Counselor to the Treasury Secretary.

The tax break, introduced under the government's 2009 Recovery Act and applicable to 2009 or 2010 college tuition, expands the existing Hope Credit to include more lower- and higher-income Americans.

Unlike the Hope Credit, the AOTC is also partially refundable and covers more of the expenses associated with sending a child to college, like textbooks and computers. It is available for the first four years of post-secondary education, up from two years under the Hope Credit.

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What is the American Opportunity Education Credit?

Earlier this week the RDTC Tax Help Blog posted a great new article explaining the American Opportunity Education Credit (AOEC), which was introduced through President Obama's American Recovery and Reinvestment Act. Check out the article below.

Expansion of the Hope Credit

Although the name is new, the American Opportunity credit is actually just an expansion of the highly popular “Hope Scholarship” credit. The former credit could only be claimed for two years (up to $1,800) to pay for tuition and other school related expenses. However, the expanded AOEC can be claimed for up to four years, or up to $2,500.

Credit Amounts

The most each student can claim is $2,500. Taxpayers can claim 100 percent of the first $2,000 in qualified educational expenses, and then 25 percent of the next $2,000 for a total of $2,500.

Allowed Expenses

The most common qualifying expenses are tuition fees and related expenses. Students can also claim other expenses depending on their individual studies. For example you could include the cost of a computer in your credit amount only if it was a requirement for a class. Likewise, you could claim the costs of a textbook if it was required reading by one of your professors. If you are unsure about a specific expense then you should speak with a qualified tax professional who can examine your unique financial situation.

Continued reading at RDTC.com…