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Some Of Your College Education May Be On The IRS!

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Get A Tax Refund For Going To College!

There's a saying that advancing one's education pays off sooner or later. Thanks to 2009's stimulus act, getting an online degree pays before you even graduate. It made it possible to get a tax refund for going to college, and that refund can be thousands of dollars. Included in this are the online college courses so many students are participating in.

This new provision is the American Opportunity Credit, an expansion and renaming of what was previously the Hope Credit. It can even be used in this April's income tax filing. Determining if and how you fit in under this benefit is imporant for every student.

According to the IRS, there are some significant differences between the Hope and Opportunity credits. The Opportunity Credit is open to a lot more applicants (or their parents). While it is currently only good for 2009 and 2010, it can be used not only against tuitions and fees, but also college-related expenses such as text books and related items. It can even be applied to people who already get a tax refund, none of which the Hope could.

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Credit Is Based On Income!

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. These income limits are higher than under the previous Hope Credits. Because this is a tax credit, it does not mean you get the money before you pay your tuition. In simple English, if you started college last year or start this year, you can either file for it this April or next, respectively.

What one gets is a 100% refund for the first $2,000 in tuition, fees and/or costs related items. For the next $2,000, one can claim an additional 25%. After the $4,000 mark it goes down to zero. So if the total costs are $6,000; one gets a 100% refund for the first $2000, 25% of the next $2,000 (or $500) and nothing for the last $2,000. That's a total of a $2,500 the following April. This new form of financial aid is worth looking into.

Make Sure Your Claim Is Allowed

If there's one thing the IRS is serious about though, it's to be careful with what one claims as "cost related". For example, just buying a computer does not make it worthy of a refund. On the other hand, if the distance learning program requires a new laptop for its curriculum, it can be claimed.

If the credit turns around and turns a tax payment into a refund, the filer gets the refund. Another important provision is if the filer is entitled to a tax refund already, i.e., without the credit, one still can get a portion of the refund as well. The only difference here is there is a cap. The filer won't get the maximum $2,500, but at most $1,000.

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It should be noted the Opportunity credit is good for only the first two years. For those planning their third year or more, one has to apply for a Lifetime Learning credit. Also, while the Opportunity credit is currently only good for the 2009 and 2010 returns, there is talk it might be extended further. For more information, check with a tax expert, a financial aid officer or go to the IRS website and look up American Opportunity Credit.

In addition to convenience, those who take an online degree course often do so for financial reasons. Exploring this tax credit, which comes after an outlay of funds, as well as online grant, scholarship, and loan options is a good way to maximize and facilitate your learning.

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SJKRAGE

I love living in Florida. I love to read, knit, and walk. I work on my computer at home and really enjoy what I am doing.

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