Expanded education credit provides greater benefit for college students

Under new tax law, the prior “Hope” education credit has been modified and expanded and is now called the “American Opportunity Credit.” According to Dean Burdick, partner with HintonBurdick CPAs & Advisors, “This expanded credit allows taxpayers a dollar for dollar credit of up to $2,500 of the cost of qualified tuition and related expenses paid during 2009 and 2010 and is available for expenses related to the first four years of college.”

“Qualified tuition and related expenses” has been expanded to include books, supplies and equipment needed for a course of study (some exceptions may apply). Also, the cost of a computer could qualify for the credit.

The credit is calculated based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000.

“This credit allows taxpayers to reduce their tax liability dollar for dollar. And, for certain individuals whose credit exceeds their tax liability, a portion of the credit could be refundable,” stated Burdick.

The full credit is available for tax-payers whose adjusted gross income does not exceed $80,000 (or $160,000 for joint filers). The credit phases out and is no longer available for taxpayers whose adjusted gross income exceeds $90,000 (or $180,000 for joint filers).

Other limitations and qualifications may apply to this credit based on individual tax circumstances. If you have further questions, please feel free to contact the HintonBurdick CPAs & Advisors office. To find the phone number of the office nearest you, as well as for weekly tax tips, visit their website at www.hintonburdick.com.