Durbin: Illinois Families Leaving More Than $1 Billion Unclaimed in College Tuition Tax Credit
[CARBONDALE] – Illinois families left more than $1 billion on the table by not claiming a tax credit for college tuition on their 2009 income tax return, U.S. Senator Dick Durbin (D-IL) said today. The American Opportunity Tax Credit would allow families to receive a tax credit of up to $2,500 per student on their 2009 and 2010 tax returns. The college tuition tax credit was originally part of the American Recovery and Reinvestment Act. A two-year extension of the tax credit was included in the tax package President Obama signed into law in December.
“Eighty percent of the fastest growing jobs in the nation require some form of higher education,” said Durbin. “If we want our economy to grow, we need to do all we can to support students pursuing a college degree. The American Opportunity Tax Credit makes college more affordable. Unfortunately, hundreds of thousands of Illinois families simply aren’t aware that the tax credit is available to them. The good news is: It’s not too late to claim the credit for 2009 or 2010. I’m urging every family with a student in college to take a fresh look at their taxes with this credit in mind. In this challenging economy, every dollar counts.”
According to the U.S. Treasury Department, less than half of eligible Illinois families claimed the credit on their 2009 taxes. The average Illinois award is $1,859 in tax savings, but only 38 percent of eligible taxpayers—approximately 375,000 families—claimed the credit last year. If the remaining families were to claim the credit at the average Illinois rate, an additional $1.13 billion would go into the pockets of Illinois families.
Over the last five years, the combined cost of tuition, fees, room and board at four-year public colleges and universities increased by 42 percent—far outpacing inflation and increases in household income. With state budgets in crisis, those numbers will continue to skyrocket. In the early 1990s, less than one-third of college graduates had loan debt. Today, more than 70 percent do.
In Illinois, two-thirds of undergraduate students take out loans to pay for college. The average student graduating this spring will have over $20,000 in student loan debt.
The college tuition tax credit provides middle-class families with children in college with $1 back on their taxes for every $1 spent on tuition for the first $2,000 and 25 percent 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 qualify for the full credit, the law provides a refund worth up to 40 percent of the credit for each student.
In order to claim the American Opportunity Tax Credit, you must itemize your taxes which can be in one of two ways, depending on whether you qualify for the refundable portion of the credit. Before filling out Form 1040, complete Form 8863 (http://www.irs.gov/pub/irs-pdf/f8863.pdf) to determine which method to use and to calculate your credit.
If you meet the eligibility criteria for a refundable credit listed on page four of the Form 8863 instructions, enter the number you’ve calculated for line 14 from Form 8863 onto line 66 of Form 1040 (http://www.irs.gov/pub/irs-pdf/f1040.pdf). Or, if you don’t meet the eligibility criteria, enter the number from line 23 of Form 8863 onto line 49 on Form 1040.
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