Liberty Tax Investigates Educational Tax Breaks That Make the Grade for Students and Teachers

 

Press Information
For Immediate Release
January 27, 2010

 

CONTACT: Martha O’Gorman
Chief Marketing Officer
(800) 790-3863 ext. 8022
martha.ogorman@libtax.com

Liberty Tax Investigates Educational Tax Breaks That Make the Grade for Students and Teachers

(Virginia Beach, VA)  The good news about the rising cost of higher education is that students and their families may take advantage of even more tax breaks and credits to offset expenses like tuition and fees. Liberty Tax Service advises taxpayers in school or with family members in school to thoroughly examine the advantages of the tuition and fees credit, the newly expanded Hope Credit, and the lifetime learning credit that may help lower their tax bills and educational costs. 

The “American Opportunity” Education Tax Credit modified the Hope credit by making it available to more taxpayers.  The costs of course materials now will qualify for the credit which will now allow up to $2,500 of the cost of college tuition and related expenses.  Forty percent of that credit will be refundable.  The amount of credit for the American Opportunity Credit will be reduced for taxpayers whose modified adjusted gross income is between $80,000 to $90,000 (between $160,000 and $180,000 for married filing jointly).

The lifetime learning credit gives a credit of 20% of qualified educational expenses not exceeding $10,000, for a maximum credit of $2,000. The amount of credit will be reduced for taxpayers whose modified adjusted gross income is between $50,000 to $60,000 (between $100,000 and $120,000 for married filing jointly).

The deduction for college tuition and fees is also available for filing a 2009 return.  This can provide a deduction of up to $4,000 whether it’s taken for you, your spouse or dependent(s). 
Qualifying higher education expenses such as tuition and certain related expenses or fees you paid for yourself, a spouse, or a dependent may be deductible.  Up to $4,000 of these expenses can be deductible as an adjustment to income if your adjusted gross income is below $65,000 ($130,000 if married filing jointly).  The deduction is limited to $2,000 if your AGI exceeds that limit but is under $80,000 ($160,000 if MFJ).  The taxpayer cannot claim both this deduction and the American Opportunity (Hope) or lifetime learning credit for the same student in the same year.

The tuition and fees deduction has some “little known” advantages over other deductible education expenses:  The tuition and fees deduction can be taken for qualified education expenses connected to employment, without the taxpayer being required to itemize deductions.  A taxpayer may qualify to claim the tuition and fees deduction even if the student withdraws from classes and is not considered a full-time student, which is required to deduct other education credits. 

“Certain related expenses” are student activity fees and expenses for course-related books, supplies, and equipment.  The tuition and fees deduction may be more beneficial than deducting the education credits on certain returns who do not have enough taxable income to utilize the full education credit, will instead be able to reduce their adjusted gross income on the federal return, which can, in turn reduce state taxable income in certain states.

This year, the economic stimulus package will allow more college expenses to be covered by 529 Plans.  Section 529 Education Plans allow families to save and plan ahead for college expenses.  Now computers and computer technology will be allowed as qualified purchases covered by 529 college savings plans in addition to tuition, room and board, mandatory fees and books.  There’s more good news about 529 plans: the tax exemption for them is now permanent and will not expire as scheduled to in 2010.

Student loan interest remains a deductible expense.  Taxpayers repaying a student loan (or education loan) may qualify to deduct up to $2,500 of their student loan interest as an adjustment to income.  There are AGI limitations which determine deductibility.  The credit may be phased out if your modified adjust gross income exceeds certain limits.  For 2009, the phase-out levels are between $60,000 and $75,000 for single, head of household, and qualifying widow taxpayers, and between $120,000 and $150,000 for married filing joint.  

Eligible educators who spend their own money on classroom supplies may qualify for a tax break again when filing a 2009 return.  An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide who works at least 900 hours in either a public or private school.  The adjustment for these expenses, of no more than $250, can be claimed whether or not the taxpayer can itemize.

About Liberty Tax Service

Call 866-871-1040 to be directly connected to the nearest Liberty Tax office.  Liberty Tax Service is the fastest growing retail tax preparation company in the industry’s history.  Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 7,000,000 individual income tax returns.  With 41 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service (NYSE:JTX).

Liberty Tax Service provides computerized income tax preparation, electronic filing, refund loans, and online filing through eSmart Tax.  Each office offers customers audit assistance, a money back guarantee, and free tax return checking.  The Liberty Tax Service franchise opportunity is #9 on the fastest growing franchises list of the 2010 Entrepreneur “Franchise 500.”

 -30-