Don’t Forget to Take Advantage of the American Opportunity Tax Credit

While many Americans remain unemployed, the federal government has extended further relief in the form of the Unemployment Compensation Extension Act Of 2010. The bill has extended unemployment benefits to November 30, 2010. For many, it is a life preserver the current economic storm. Yet, there is another piece of legislation that was issued last year that affords another option for some Americans to turn their economic situation around through continued education.

This “opportunity” comes in the form of the American Opportunity Tax Credit. The credit was issued as part of the American Recovery and Reinvestment Act (ARRA) of 2009, and is being offered until December 3, 2010. This tax credit provides help to those parents who have children either in college or getting prepared to enroll. It offers options for reducing the financial burden associated with various college expenses and fees. You will not have to pay as much federal taxes. Also, around 40% of the credit is refundable even if you don’t have a tax liability. Students will then be able to receive $1,000 cash back.

Essentially, if you wish to make use of the American Opportunity Tax Credit before it’s gone, you need to act soon – even now. As with any tax credits you must meet the guidelines for eligibility.

The amount available is based on the amount of your modified adjustable gross income. If it is between $80,000 and $90,000 (as a single taxpayer) and $160,000 and $180,000 (if you and your partner file a join tax return) the amount of credit will be reduced accordingly.

Those who take the credit will be able to use it to pay tuition and related expenses including fees, books, and other required course materials during the 2009 and 2010 academic years. Additionally, the tax credit can be used to cover the first four years of college education.

Bear in mind that you cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or related educational tax credits. You will have to take the credit or the deduction. You might want to think about which option is better for your situation.

While there are other advantages to taking the credit, you really must act now. Time is growing short. Rather than sitting around waiting for the same kind of jobs to open up while collecting unemployment, you could start on an entirely new career path. There may be opportunities you never thought possible available if you simply take the credit now.