The Recovery Act invested millions in new projects that are improving our infrastructue, repairing homes, and much more. But it also provided millions in direct benefits for families, students, businesses, investors, and more including more than $288 million in various forms of tax relief. Guidance on how to access each of those benefits is below.
The Recovery Act includes two significant tax provisions that benefit those pursuing higher education.
American Opportunity Tax Credit
The American Opportunity Tax Credit provides a tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit would be refundable, and the entire provision phases out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly). The American Opportunity Tax Credit is in effect for 2009 and 2010.
Adjustment to 529 Savings Plan
Section 529 Education Plans are tax-advantaged savings plans that cover all qualified education expenses, including tuition, room & board, mandatory fees, and books. The Recovery Act allows computers and computer technology to be considered as qualified education expenses.
