President Obama and Congress have taken steps to help students and their families pay for a good college education. However, fewer than half of eligible families have taken advantage of it.
If you or your parents haven’t claimed the American Opportunity Tax Credit, there is still time.
Over the last 5 years, the combined cost of tuition, fees, room and board at four-year public colleges and universities increased by 42% - far outpacing inflation and increases in household income. And with state budgets in crisis, those numbers will continue to rise.
Recognizing this, Congress passed and the President signed into law a tax credit that allows students and families to receive up to $2,500 per year to help make college more affordable.
That American Opportunity Tax Credit was set to expire in 2009, but fortunately, we were able to include a 2-year extension in the tax package that the President signed into law in December.
The tax credit provides middle-class families with children in college or students themselves with $1 back on their taxes for every $1 spent on tuition, college expenses, books and supplies for the first $2,000 and 25% of the next $2,000 for up to $2,500 per year. For families with children in college who do not have enough income tax liability to offset the full credit, the law still provides a refund worth up to 40% of the credit for each student.
This is an important benefit to Illinois students and families. But, according to the Treasury, fewer than half of eligible families claimed the credit on their 2009 taxes. The average Illinois award is $1,859 in tax savings, but only 38% of eligible taxpayers claimed the credit last year.
It’s not too late to claim the credit for 2009 in addition to filing for the credit on your 2010 tax return and it’s easy to do.
First, go to IRS.gov and fill out form number 8863. This allows you to itemize your college expenses. Fill out Part I with the name of the student, social security information, and qualified college expenses – that means tuition, books and supplies that are needed for the course of study. The rest of the form will help you determine if you are eligible for the credit.
Once you have finished completing your 1040 or 1040A form, you can determine if your itemized tax deduction is greater than your standard tax deduction. If your itemized is greater, then you can claim the American Opportunity Tax Credit.
I encourage all Illinois students and families who qualify to claim their credit while filing taxes this year.