The hotly debated tax deal negotiated by President Barack Obama and congressional Republicans and approved by Congress has several little-recognized goodies for higher education, namely in the form of tax credits that help students and their families pay for college.
Included in the bill, H.R. 4853, is an extension of the American Opportunity Tax Credit (AOTC), a provision of the 2009 economic stimulus law that expanded higher education benefits for lower- and middle-income families. Estimates indicate that more than 8 million students and families use the credit, says the National Association of Student Financial Aid Administrators (NASFAA).
The AOTC provides a credit of up to $2,500 and is a greater help to many students than its predecessor, the federal HOPE Scholarship, says Jim Hermes, government affairs director for the American Association of Community lleges. Unlike the HOPE Scholarship, the AOTC is partially refundable. As a result, Hermes says, low-income families can get up to 40 percent of the credit, or $1,000, refunded to them for eligible tuition costs.
“If you have no tax liability, you can still get a benefit,” he says.
The $2,500 credit also is larger than the HOPE Scholarship and covers course materials in addition to tuition and fees. At some community colleges, course materials may run as much or more than tuition.
“If you’re attending an institution with very low tuition, educational materials may cost you more,” Hermes notes. “This is a larger credit and better for students attending low-cost institutions.”
Middle-income and more affluent families can receive the maximum credit.
