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Usually, when one thinks of financial aid, they think about getting it on the front end, i.e., toward paying one’s tuition before you start class. Thanks to last year’s stimulus act, one can now get money on the back end, too. In other words, one can get a tax refund for going to college. This could be a few thousand dollars and works for on campus and online college course attendees.
This new provision is the American Opportunity Credit, an expansion and renaming of what was previously the Hope Credit. It can even be used in this April’s income tax filing. Determining if and how you fit in under this benefit is important for every student.
According to the IRS, there are some significant differences between the Hope and Opportunity credits. The Opportunity Credit is open to a lot more applicants (or their parents). While it is currently only good for 2009 and 2010, it can be used not only against tuition and fees, but also college-related expenses such as text books and related items. It can even be applied to people who already get a tax refund, none of which the Hope could.
The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. These income limits are higher than under the previous Hope Credits. Because this is a tax credit, it does not mean you get the money before you pay your tuition. In simple English, if you started college last year or start this year, you can either file for it this April or next, respectively.
One gets a full refund for the first $2,000 in tuition, fees and/or costs related to going for a degree. If the costs go beyond that first $2,000, one can have an additional 25% refunded up to the next $2,000. For example, if a school year costs $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. That’s a total of $2,500 credit when filing one’s 2009 or 2010 income tax.
It can get sticky with the “cost related” aspect. For instance, just buying a computer does not automatically mean one can apply the Opportunity credit to it. On the other hand, if one’s courses forces a student to buy a computer, such as getting one that can handle online colleges, then it’s a legitimate expense for the refund.
Most important is the Opportunity could turn into a refund. One can be entitled even if one gets a tax refund without the credit. Again there are some provisos. The refund has a cap of $1,000 instead of $2,500.
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.
Financial reasons, as much as flexibility, are considered by students when they take their degree programs online. Exploring this refund, as well as potential monies prior to starting school, such as their student loans, may enable more students to attend and further their careers than ever before. If you are interested and would like more information about your money for college, check the internet.
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