The American Recovery and Reinvestment Act of 2009
If you are planning on attending an institute of higher education in the future, there is some good news for your wallet. Now that Congress has passed the American Recovery and Reinvestment Act of 2009, getting that education may bit a bit easier.
Student Loan Interest
The good news is that many folks who in the past were unable to take advantage of this tax break can now do so thanks to more relaxed rules concerning the deduction of student loan interest. You can write off up to $2,500 of annual college loan interest charges if you qualify. The bad news is that if your modified AGI is too high, the break is phased out. The 2009 phase-out range for unmarried taxpayers is between modified AGI of $60,000 and $75,000, the range is between modified AGI of $120,000 and $150,000 for joint filers.
Hope Scholarship Credit
For 2009, the Hope Scholarship credit amounts to 100% of the first $1,200 of a college student's annual tuition and fees (no room and board costs) plus 50% of the next $1,200. So the maximum Hope credit is $1,800 per qualifying student. But here's the rub: The Hope credit can be claimed for only two tax years for any one student. It's unavailable after the student has logged two years' worth of academic hours. Also, the Hope credit is allowed only when the student carries at least half of a full-time load for at least one academic period beginning in the year the credit is claimed.
Lifetime Learning Tax Credits
The Lifetime learning credit is less restrictive. It's mainly intended to help defray college costs after the first two years, when the Hope credit is no longer allowed. The Lifetime credit is available for an unlimited number of years and without any requirement to carry a certain course load. Graduate courses are cool. So are random classes not intended to lead to any sort of degree, such as professional training seminars and courses to update your software skills. The credit equals 20% of tuition and fees up to $10,000, for a maximum annual credit of $2,000.
Qualifying expenses for both the Hope and Lifetime credits include post-secondary tuition and fees for you, your spouse, and any other person claimed as a dependent on your tax return.
For 2009, both credits are phased out between adjusted gross income of $100,000 and $120,000 for joint filers; $50,000-$60,000 for unmarried taxpayers. You're completely ineligible if you're married and file separately from your spouse.
