Tax Benefits for Education

There are a variety of tax credits, deductions and savings plans available to taxpayers to assist with the expense of higher education. As part of the American Recovery and Reinvestment Act of 2009, the Hope Scholarship Tax Credit was renamed the American Opportunity Tax Credit. Under this act, more parents and students will qualify over the next two years for a tax credit to pay for college expenses.

American Opportunity Tax Credit
Beginning January 1, 2009, the American Opportunity Tax Credit may be claimed for qualified tuition and related expenses of each student in a taxpayer's family (the taxpayer, the taxpayer's spouse or an eligible dependent). The new credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the previous Hope and the existing Lifetime Learning credits.

The student must be enrolled at least halftime in a program leading to a degree, certificate or other recognized educational credential. The amount that may be claimed as a credit is generally equal to: 100% of the first $2,000 of your qualified tuition and related expenses, plus 25% of the next $2,000 of your qualified related expenses.

The maximum credit a taxpayer may claim for each taxable year is $2,500 multiplied by the number of students in the family who meet the criteria. The tax credit may be used for payments made after January 1, 2009, for academic periods beginning on or after January 1, 2009. Payments made prior to January 1, 2009 may not be claimed for the tax credit.

Vangent TRA Services will be providing the 1098-T forms to students enrolled in the Diploma and Degree Programs.

IRS question and answer site for American Opportunity Tax Credit

Lifetime Learning Credit
The Taxpayer Relief Act of 1997 provides a Lifetime Learning Credit for qualified tuition and fees for eligible students for post secondary education, including any course of instruction to acquire or improve job skills. This tax credit became effective July 1, 1998 for education furnished in academic periods beginning after that date. The amount you may claim as a credit is equal to 20% of your first $10,000 for out of pocket qualified tuition and expenses. The maximum credit you may claim for 2009 is $2,000. If you are claiming an American Opportunity Tax Credit, none of the expenses may apply to the Lifetime Learning Credit. Vangent TRA Services will be providing 1098-T forms to students enrolled in the Diploma and Degree Program.

IRS questions and answers site for Lifetime Learning Tax Credit

Student Loan Interest Deductions
Taxpayers that have taken loans to pay the cost of a qualified institution for themselves, their spouse or their dependent may deduct interest they paid on these student loans if their modified adjusted gross income (MAGI) is less than $70,000 ($145,000 if filing a joint return). For 2009, the maximum deduction each taxpayer is permitted to take is $2,500. The deduction is available only for interest paid during the first 60 months of the loan period. The interest deduction will be allowed on the payments due and made after January 1, 2009. Payments made prior to that date are not allowed. Your lender will provide the 1098-E forms. If you have any questions call the telephone number on the 1098-E form you receive from your lender or servicer.

IRS question and answer site for Student Loan Interest Deduction

More Information
If you are eligible for any of these tax credits, please refer to tuition statements you received from the Business Office for the calendar year of 2009. This would include enrollment periods of spring 2009 (January through May) and fall 2009 (September through December). If you require this information, you can fax your request to 617-369-3131, e-mail bursar@smfa.edu or call the Business Office at 617-369-3631. When faxing or e-mailing your request, please include your name, student name, social security number, mailing address, telephone number and enrollment period. Neither the bursar, the Business Office staff or any office in the School is able to provide tax advice.

This information was prepared to advise you about the educational tax benefits available to students. This is not an official tax document; it is our interpretation and understanding of the Act. Please seek information from one of the free information sources provided for you below, contact your accountant, or seek assistance from a tax consultant, attorney or other available sources.

Additional tax information may be found at the following Web sites:
NACUBO
Internal Revenue Service

Additionally you may call the following phone number:
IRS at 1-800-829-1040. Ask for Publication 970, Tax Benefits for Higher Education.