Changes give more tax breaks to college studentsChanges in federal tax breaks for college students and their parents are boosting the potential tax savings to thousands of dollars.
By: News Tribune staff, Duluth News Tribune
Changes in federal tax breaks for college students and their parents are boosting the potential tax savings to thousands of dollars.
The Hope Credit, which helped students and parents pay part of the cost of the first two years of college, has been modified by the American Opportunity Credit. The result is greater tax savings to more people in 2010.
Instead of credits for just the first two years of college, it now applies to four years of post-secondary education. The cost of textbooks and course materials can be included, in addition to the cost of tuition.
The maximum credit has been increased to $2,500, which is a dollar-for-dollar savings in federal income taxes. The credit — which is computed on schedules filed with federal returns — is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000.
Income limits for those who qualify for the credit have increased to $80,000 in adjusted gross income, $160,000 for joint fillers. Even people who don’t owe taxes can get a credit of up to $1,000.
Rule changes for 529 tax-free college saving plans now allow the plans to pay for students’ computer, Internet access and other computer technology.