Parents looking for some debt relief can find aid trough a tuition tax credit of up to $2,500. Part of Obama’s stimulus bill is the higher-education tax credit. The stimulus, signed into law in February, should hopefully help Americans who are financially struggling.
This particular tax credit aims to help parents who are paying for college tuition this year. One of the benefits of this credit is that it requires no additional paperwork or a hefty financial aid application. Students only need to file their tax returns on time to take advantage of it. Jackie Perlman, analyst for H & R Block stated, “This will definitely help people.”
Complicated tax code
Like all tax code, the tuition credit does come with some complexity. In return for sorting through its regulations, however is a “bigger and more inclusive [tuition credit] than previous higher-education tax credits, which were so complicated that more than a quarter of eligible taxpayers failed [to get them],” according to Perlman.
Those who were able to collect normally saw a return of about $900. This time around the $2,500 tuition credit promises to be much simpler to manage. Perlman stated, “Any professional tax preparer knows how to use the credit and parents filing themselves can still do it relatively easily.”
How the credit works
Perlman explained the rules by sorting out some of the details:
- Taxpayers can utilize the credit for a reduction of their 2009 taxes.
- The credit can be up to $2,500, and even if taxpayers owe no money, they can still get a credit of $1,000.
- The tuition credit covers tuition, fees and books that were paid for throughout the 2009 to 2010 school year.
- The tuition credit is available to undergraduates who are enrolled at least half-time.
- Taxpayers with $80,000 adjusted gross incomes or $160,000 jointly-filed incomes are eligible for the full tax credit.
- Taxpayers who earn more than $90,000 and $180,000, single and joint filers, respectively, do not qualify.
- Because the credit covers only tuition, fees and books, students who have scholarships or grants that cover these are ineligible.
- Students with any drug felony convictions are not eligible either.
In the end, the tax credit is useful to a wide variety of taxpayers who are seeking small ways of finding debt relief. They need to follow a few rules to take advantage of the credit. Taxpayers can claim 100 percent of the first $2,000 they spend on tuition, fees or books and 25 percent of the next $2,000 spent. For example, if a parent has a $4,000 expense for tuition, fees or books, they can take $2,500 off of their 2010 taxes. If they owe less than the $2,500, then the government will return 40 percent of “whatever extra credit they qualify for, up to a maximum of $1,000.”
Finding help with college
Parents should utilize every tool they can to help defray the costs of college. It’s standard practice that tuition, fees and books increase every year as colleges and universities try to manage their own debt in a difficult economy.
With potentially an additional $2,500 in tax credited money, consumers can find some debt relief to help with their budgets. It may take a professional to sort through the complete tax code, but in the end it is worth the added trouble.