An education tax credit temporarily improved last year—and may benefit you even if you don’t owe taxes.

The American Recovery and Reinvestment Act enacted in early 2009 increased the tax credit for college expenses for 2009 and 2010. The credit is refundable, meaning if you owe no tax, you may still receive a refund of up to $1,000. It provides up to $2,500 in credits for the first $4,000 of qualifying college expenses. 

Making the change even better, the definition of “college expenses” expanded: not only does it include tuition and required school fees, but it also includes the cost of course materials such as lab supplies, software and other class needs. Students should keep all receipts for tuition, books, supplies and other required college items as supporting documentation.

In addition, the credit expanded to cover all four years of post-secondary education instead of two. Like other credits, this one is phased out for higher income individuals. Full credit is available to those with modified adjusted gross income of $80,000 or less, or $160,000 or less for married couples filing jointly.

For more information on how to take advantage of this opportunity, give us a call at 396-5400.

Filed under: Tax by Lisa Campbell