I’m a Fort Worth resident enrolled in college; can I qualify for any tax deductions or tax credits

Gregory S. Simpson is a Certified Public Accountant (CPA) who is the founder of Gregory S. Simpson and Associates P.C., a CPA firm located in the suburbs of Fort Worth in North Richland Hills, TX. Gregory S. Simpson and Associates specialize in accounting work, tax planning and consulting and preparation of business and individual tax returns.  Greg has over 40 years of accounting and tax experience and over 30 years as a professional CPA. He answers questions from time to time for the residents of Fort Worth on tax related issues.  

With the 2009 calendar year coming to an end, many of us are throwing are hands up in jubilation and glee. Hoping the economic difficulties are behind us and the 2010 calendar year will bring brighter days.

Many who experienced economic difficulties or layoffs this year may have decided to go back to school. If so, the long term investment to improve your skill set should pay dividends in the future, but for now the immediate reward can be found by claiming the American Opportunity tax credit.

When the government passed the 2009 economic stimulus bill, it included a number of acts to help stimulate the economy and avert a depression. One of those acts enacted was the American Recovery and Reinvestment Act. Under the American Recovery and Reinvestment Act is the American Opportunity Credit. This credit will benefit parents and students who pay for college expenses.

The American Opportunity Credit can benefit tax wise Fort Worth residents making the sacrifice to go to school. The new credit modifies and expands the existing Hope Credit for the tax years of 2009 and 2010. The American Opportunity Credit is available to a broader range of taxpayers, such as taxpayers who have higher incomes or who owe no tax. “Taxpayers will receive a tax credit 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 of tuition, fees and course materials paid during the taxable year.” –IRS website.  The credit is not just for two post-secondary education years (as the Hope Credit was) but instead is for four-post secondary education years.

To be eligible for the full American Opportunity Credit individuals must have a modified adjusted gross income of $80,000 or less, or if married filing jointly, a modified adjusted gross income of $160,000 or less.  The credit is claimed using the Form 8863, attached to Form 1040 or 1040A.

The education expenses that qualify for the American opportunity credit include expenditures for course materials. “Course materials” can include books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.  An expenditure for a computer would qualify for the credit if the computer is needed for enrollment or attendance at the educational institution.

For more information on the American Opportunity Credit, go to the www.irs.gov website or visit our website at www. gregoryssimpson.com . You can also contact us at 817-656-3397 or by e-mail at admin@gregoryssimpson.com