If you or a dependent have a college-related expenses, you should review the following federal education tax credits that you prepare your 2009 federal tax return. These tax credits can be claimed for qualified expenses education funds of the taxpayer, the taxpayer’s spouse or dependents of the taxpayer.
- American Opportunity Credit was created by the Obama administration to assist students and parents bear the cost of the first four years of college. The American Recovery and Reinvestment Act changed the Hope Tax Credit for tax years 2009 and 2010. Therefore, it is available to more people. Taxpayers may qualify for a tax credit up to $ 2,500 per student for the taxable year. Up Yo 40% of the credit is refundable, which could lead to $ 1,000 refund even if the tax payer does not owe taxes.
- Hope Tax Credit has been around since the Clinton administration and has been applied to the tax year 2008, and earlier, but has been expanded for tax year 2009. The credit may be claimed for up to $ 3,600 for students attending the Midwestern disaster area, as long as American Opportunity Credit is not taken. This credit can be taken either the student or parents to assist with the cost of the first two years of college.
Lifetime Learning Credit is another Clinton era education credit. It can be used to assist with the cost of university, including graduate and professional degree courses. This includes job skills improvement courses, regardless of the length of the system. Credit is worth up to $ 2,000 per tax return. If a student attends college in a Midwestern disaster area, the limit is $ 4,000 per tax return.
You can not claim the American Opportunity Credit, Hope Credit and the Lifetime Learning Credit for the same student in the same tax year. You can claim more than one education tax credit per year for various different students.
Tuition and fees Deductions may be required by students or parents are able to reduce tuition and related expenses and up to $ 4,000. This is not a tax deduction, which means that qualified amount is deducted from taxable income. It reduces taxable income and as a result the amount of taxes paid. Also, you can not claim the education tax credit in the same tax year as you use the tuition and fees deduction.
Note: Students can not take this deduction, if claimed as a dependent parent.
Student Loan Interest Deduction is available if you paid interest in education in 2009. You may be able to take the Student Loan Interest deduction of up to $ 2,500. To qualify tax status can not be “married filing separate”; Adjusted Gross Revenue (AGI) is less than $ 70,000 or $ 145,000 if filing jointly; you or you spouse, if filing jointly, can not be claimed as a dependent on someone else’s tax return. Deductions will phase out certain AGI levels.
For more information on these credits and deductions, you can refer to IRS publications: Publication 970 T ax Benefits for education and Form 1098 E, Student Loan interest statement and discuss them with a tax preparer.