Did high textbook fees break your budget in 2009? You can now - finally - reduce your taxes by a percent of the amount spent on college course books. You may even get up to 40% of the credit refunded to you.
In the past, taxpayers claiming the "Hope" credit were only permitted to write off tuition and fees. Textbooks were specifically excluded.
The textbook exclusion was lifted as part of the American Opportunity Credit. If you paid for textbooks in 2009 and 2010, you'll be able to claim that credit.
The credit is equal to 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
In addition, the American Opportunity Credit can be used by more people this year. The IRS raised the income ceiling for eligibility, so that now a single taxpayer with modified adjusted gross income of up to $80,000 ($160,000 filing jointly) can benefit.
Since 40% of the credit is refundable (another "first"), if you owe no tax otherwise, you're looking at receiving up to $1,000 cash for each eligible student. (Unless your student earned investment income taxed at the parents' rate, which applies to a miniscule percentage of students.)
Are you a graduate or post-grad student? Don't despair. Even though you may not take the American Opportunity Credit, you probably still qualify for the Lifetime Learning Credit or the tuition and fees deduction on your 1040/1040A, Form 8917.
If you qualify, please do NOT miss out on taking this credit. Check http://www.irs.gov/newsroom/article/0,,id=205674,00.html for details.
***Remember: Taxpayers cannot claim an education credit AND the Form 8917 tuition and fees deduction in the same year. It's recommended you complete both worksheets to figure out which one gives you the biggest credit.
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