Students and parents can take advantage of a new tax break available this year to expand the amount of money spent on tuition they can write off on their taxes.
The American Opportunity Credit is a new expansion on a previous college tax credit, allotting more money and making it available to more students. The credit was just a small part of a much larger tax package included in President Barack Obama’s stimulus plan.
Donald Goldman, a certified public accountant and professor of practice at ASU’s school of accountancy, said many students can take advantage of the credit.
“A majority of students claimed as dependents can qualify for the break,” Goldman said.
Students that qualify must be in households with an income of less than $80,000, according to the Internal Revenue Service Web site. Goldman said students can receive the credit if they pay taxes themselves or are claimed as dependents on their parents’ tax filing.
For joint filings submitted by households with a married couple, the income limit is $160,000.
The American Opportunity Credit is an expansion of the Hope Credit, which allowed parents and students to write off a certain amount of tuition they paid, up to $1,800, for their child’s tuition and only for the first two years of college.
The credit allows parents to write off up to $2,500 per year and can be credited for the first four years of college.
American Opportunity also covers more college expenses than the previous credit.
“Under this new break, students can write off course materials, such as books or any other mandatory supplies,” Goldman said.
Course materials were not previously covered by the Hope Credit, he said.
Interdisciplinary studies sophomore Corey Cho said he can use all the help he can get in paying for school.
Tuition and expenses used to be covered entirely by his financial aid, Cho said, but he has had to take out loans in recent semesters because of rising tuition and costs.
“My aid has been falling a couple thousand dollars short,” Cho said.
His family used to hire a tax professional to do their yearly filing, Cho said, but now they do it themselves.
“My mom sets aside an entire day to do it all herself, it really stresses her out,” he said.
The credit will only be available for this and next year’s filings, so students and parents eligible for the credit should take advantage now, Goldman said.
The expansion was created to assist those students who had utilized the Hope Credit and to briefly extend help to more middle-class students, Goldman said.
“Whether it becomes permanent is open to question,” he said.
Reach the reporter at chase.kamp@asu.edu
