Education Tax Credits Essay

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Shaina Marrs Acct 401- GDB Forum 3 Thread February 15, 2011 As a student pursuing further education, tax credits and tax adjustments are of great interest to me. Choosing whether to take the, “American Opportunity Credit,” or to just deduct my tuition and fees expenses is pretty complex. The decision for students is dependent on a few areas. Therefore, two students may have the same expenses but may choose a different route to take. The American Opportunity credit is an educational credit available for eligible students. This credit is available for qualified expenses incurred by a taxpayer, taxpayer’s spouse, or taxpayer’s dependent (Willis, E., Hoffman, W., Maloney, D. & Raabe, W., 2010, p. 12-22). To be considered an eligible student, “a student must take at least one half of the full time course load for at least one academic term at a qualifying educational institution (Willis, et al., 2010, p. 12-22).” Once deemed as an eligible student, the next are to consider is that, “this credit permits a maximum credit of $2500 per year (100 percent of the first $2000 of tuition expenses plus 25 percent of the next $2000 of tuition expenses) (Willis, et al., 2010, p. 12-22).” While the maximum credits are calculated off of tuition costs, it is not dependent on who pays this tuition. For instance, if a student relies on student loans for 100% of their tuition and fees (including books), they are just as eligible as a student who pays their tuition and fees (including books) personally with their own money, not needing loans. At the same time, this credit is limited to income brackets. The American Opportunity Credit is phased out (not available) for those individuals with an AGI of $80,000 or more, filing single and $160,000 for married tax payers filing jointly (Willis, et al., 2010, p. 12-23). If an individual chooses to take the American Opportunity Credit, the

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