Tax Credit Eases HSU Student Financing

Jan 13, 2010

A provision in the federal stimulus package signed by President Obama last February will enable more Humboldt State students and parents to qualify over the next two years for an annual tax credit of up to $2,500 per student to pay for college expenses.

The new provision is called the American Opportunity Credit and will make the 1997 Hope Credit available to a broader range of taxpayers for the tax years 2009 and 2010. The expanded category of taxpayers includes many with higher incomes and those who owe no tax. Generally, 40% of the new credit will be refundable for most taxpayers, who may receive up to $1,000 even if no taxes are owed.

The new credit will allow most taxpayers to make a claim for four post-secondary education years instead of the two under Hope. According to the Internal Revenue service, many of those eligible will qualify for the maximum annual credit of $2,500 per student, up from previous years.

The full credit will be available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for incomes above these levels. The income ceilings are higher than those under the prior Hope and Lifetime Learning Credits codified 13 years ago.

In addition to greater tax relief, the American Opportunity Credit enlarges the tuition and related expenses that qualify, including books, supplies and equipment needed for coursework. The federal stimulus, known officially as the American Recovery and Reinvestment Act (ARRA) of 2009, added computer technology to the list of college expenses that can be paid for by “529 plans.” They are qualified tuition vehicles that offer certain advantages under the federal tax code. The 529s come in two basic versions, tuition plans and savings plans.

Eligible “computer technology or equipment” includes not only computers themselves, but also education software, Internet access and related services.

For complete details, download the fact sheet (PDF)