Students looking for financial relief from the increasing pile of college expenses at the start of the spring semester may find it in the American Opportunity Tax Credit.
The tax credit, signed into law by President Barack Obama on Feb. 17, 2009 under the American Recovery and Reinvestment Act, provides eligible undergraduate students with up to $2,500 in tax refunds for tuition and college-related expenses.
Graduate students can also receive part of this refund by filling out the section on the Tax Form 8863 called Lifetime Learning Credit.
To be eligible for these educational tax credits, taxpayers who apply must have a modified adjusted gross income of less than $80,000 or $160,000 if two spouses are filing one tax return.
Although this tax refund does not apply to certain expenses such as room and board, transportation, insurance or medical expenses, it does cover course-related books, equipment and loans.
Marilyn Yunker, master tax adviser for H&R Block Premium, said mandatory expenses will be eligible for refunds. She added that supplementary books that are recommended by instructors but are not actually required for courses do not qualify for the reimbursement.
Eligibility is determined by the student’s school. The University provides students with a 1098-T statement, which lists eligible fees and expenses, in the spring semester.
Students must receive their 1098-T statements issued by their schools in order to file for the tax credit.
If all requirements are met, taxpayers will receive a tax credit based on 100 percent of the first $2,000 spent on education-related expenses and 25 percent of the next $2,000 spent on college, according to the Internal Revenue Service’s website.
This credit is an extension of a previous tax refund, the Hope Tax Credit, which provided up to $1,100 in refunds for a maximum of two years at post-secondary institutions. The Hope Credit was signed into law under President Bill Clinton as part of the Taxpayer Relief Act of 1997.
Sonja Kirkland, adjunct professor in psychology, said she used the Hope Tax Credit while she was enrolled in graduate school.
“I would definitely encourage students to take advantage of the American Opportunity Tax Credit,” she said, adding that the Hope Tax Credit helped her afford tuition.
Kirkland also said that if a student or his or her parents are paying for college out of pocket, tax credits can significantly benefit them when completing their tax returns.
Federal government tax refunds often offset the mounting pile of student debt and rising college tuition costs, helping students afford continuing their education.
Freshman Hania Kahlon, a pre-med student, said that the students who need financial help deserve to have it. “It is a good chance for responsible students to take advantage of this opportunity,” she said, adding that these funds will help students who might not be able to afford college.
Sophomore Marcell Johnson, a psychology major, is considering applying for the American Tax Credit. “I would save the tax refund and use it to pay for my college expenses,” she said.
The 8863 form that includes the education tax credit information can be found on the IRS website, but the 1098-T tuition statement can only be sent by a student’s schools by mail through the end of February.