Pay For College With Tax Credits
When the American Recovery and Reinvestment Act (ARRA) was passed in 2009,early in the Obama administration’s tenure, it expanded the popular Hope tax credit for students attending college. This tax credit was designed to help offset college tuition expenses as well as other college related expenses.
Tuition and fees are the main areas that you may claim the credit for. Higher education purchased in 2009 or 2010, primarily, at any level of tradition college, years one through four. The credit is now called the American Opportunity credit and has increased by $700 to $2,500.
The other qualified expenses covered include books, supplies, and equipment. Anything that is required for the classes that you or your student are taking. A new laptop would be a nice way to spend the tax credit. To get the full amount of the $2,500 tax credit, a student needs to spend $4,000 on higher education during the year as the 2nd $2,000 is paid out at 25% of the expense.
There is a phase out if you earn over $80,000 or you and your spouse earn over $160,000, but $1,000 of the $2,500 is refundable beyond any tax that you might owe. IRS Form 8863 is the form you should complete when you prepare your taxes to claim the American Opportunity credit this year.