Free money for students

Vivian Volirakis

The Signal Staff

Some financial relief for college students and their parents is finally here. Students can earn up to $2,500 per year and, maybe, even get a computer.

The Internal Revenue Service has issued a new tax relief for college students under the American Recovery and Reinvestment Act that was signed into law earlier this year. The ARRA has made some beneficial amendments and expanded the former Hope tax credit for college level students. The modified version of the credit is called the American Opportunity Tax Credit.

Not only is the act geared toward previously qualifying students and families, it also stretches a financial hand out to a wider variety of people to distribute to a broader range of incomes. “We encourage tax payers to look into this tax credit; it will really benefit them,” said Lea Crusberg, Houston IRS Spokesperson.

Students can now claim up to $2,500 of the cost of qualified tuition and related expenses such as books and supplies on their 2009 and 2010 tax returns. This is a $700 increase from the previous amount available per student through the original Hope credit.

Another improvement made to the bill is to expand the tax credit to students enrolled in their first four years of post-secondary school as opposed to the original Hope credit which was only available to students enrolled in their first two years of post-secondary education.

All students enrolled in their first four years of a post-secondary school who have an adjusted gross income of less than $80,000, or $160,000 for married couples filing a joint return, are eligible.

If one has an AGI between $80,000 and $90,000 ($160,000 and $180,000 for those filing a joint return) the credit is gradually reduced depending on the amount of one’s AGI.

Even students who are unemployed or do not normally file a tax return with the IRS are encouraged to file anyway; they may still be eligible for a refund up to $1,000.

“This will be very helpful financially for college students, especially to pay for Taco Bell, entertainment and other extras you need in college,” said Eric Martin, business major at University of Houston-Clear Lake. “I could also use the extra money to pay back my student loan.”

The credit can be claimed using Form 8863 and attaching it to either Form 1040 or 1040A at the same time one would normally file his or her annual tax returns.

Students who are beneficiaries of a Qualified Tuition Savings Plan also referred to as a Section 529 College Savings Plan, during 2009 or 2010 may now use their funds to purchase a computer, Internet service or any technology related device for their coursework. Each state has its own set of 529 College Savings Plans unique to each individual state.

“For us, being in the Financial Aid business, anything that will help students is most definitely something we strongly support and urge students to take part in,” said Billy Satterfield, associate director of financial aid at UHCL.

For more information and a video on The American Opportunity Tax Credit, visit www.irs.gov/newsroom/article/0,,id=211309,00.html and www.youtube.com/irsvideos. Information is also available by visiting the audio site at iTunes to listen to IRS podcasts about the AARA tax credits.

To find out about the 529 College Savings Plans offered in Texas, please visit www.dart-creations.com/article-tree/texas_529_plan.html.