Students now have the opportunity to receive a refundable credit for out-of-pocket course material expenses or tuition that was not covered by scholarship or a financial aid grant for the 2009-2010 academic year.
The American Opportunity Tax Credit available to students is part of the American Recovery and Reinvestment Act signed into law by President Barack Obama on Feb. 17, 2009.
According to the Internal Revenue Service Web site, the American Opportunity Tax Credit is a modification to the existing Hope Credit.
The American Opportunity Tax Credit is available to a broader range of tax payers, including those who have higher incomes and have no tax liability. The credit also allows books and materials required for courses to be eligible for refundable credit, which can be claimed for up to four years of a student’s post-secondary education.
This means a student who is currently a freshman would be able to claim the American Opportunity Tax Credit from freshman to senior year if the credit is extended beyond 2009 and 2010.
The American Opportunity Tax Credit can cover up to $2,500 of the out-of-pocket cost of tuition and expenses.
For the first $2,000 spent, 100 percent is eligible for the tax credit, and on the next $2,000 spent, 25 percent is eligible. Once the amount eligible is determined, 40 percent of the tax credit is refundable with the maximum amount being $1,000.
To be eligible, students who apply must have an adjusted gross income below $80,000 or $160,000 for married couples.
Richard Hershman, director of government relations for the National Association of College Stores, was an advocate for books and course materials being added to eligible expenses under the American Opportunity Tax Credit.
“The American Opportunity Tax Credit represents a more robust and generous tax credit than has existed in the past,” Hershman said.
The original tax credit, the Hope Credit, covered 100 percent of the first $1,100 and 50 percent of the second $1,100 of qualified tuition and related expenses.
NACS created a brochure that is available in the University Bookstore as a resource for students and their families to learn more about the credit.
Hershman said NACS partnered with the IRS to develop the brochure because the association has found that many students who were eligible for past tax credits did not apply because they were not aware of them.
Marilyn Yunker, master tax adviser for H&R Block Premium, has more than 16 years of experience preparing taxes. She said previously students could only take credit against their tax liability while the new credit provides the opportunity for a refund. She said that there is a limit to claiming one credit per taxpayer.
Yunker advised students to keep itemized receipts of all books and course materials purchased from any vendor.
She said to begin the process of applying for the credit students must first file a return for 2009. The return must include the education form 8853 with the top section completed in order to apply for the credit.
Yunker added students must also obtain their 1098-T, which is a student’s tuition statement to complete their taxes.
Senior Christina Espinoza said she plans on taking advantage of the new tax credit.
Espinoza, a nursing student, said she spent about $800 on books and course materials for classes and clinicals.
“I definitely want some of my money back,” Espinoza said.
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