Double Education Tax Credits for Midwest Disaster Zones
Students at approximately 60 colleges located throughout seven states
in the 2008 federally declared Midwest disaster areas may be entitled
to twice the general education tax credits when preparing their 2008
and 2009 tax returns.
Are you or any of your dependents attending the University of
Wisconsin-Madison, the University of Wisconsin-LaCrosse, Iowa State
University, the University of Iowa, or Marquette University? If so, you
may be eligible for this financial relief.
“On top of the education breaks in the stimulus act, the enhanced
Hope and lifetime learning credits will help a lot of taxpayers at
schools in Midwest disaster areas cover the cost of higher education.
In 2008 and 2009, your credit may be as high as $3,600,” says Pat
Sturz, LarsonAllen tax principal located in the Eau Claire, Wisconsin
office.
When deciding whether the Hope or lifetime credit is best for your
financial situation, Sturz recommends seeking consultation from your
tax advisor.
States in disaster areas
These special education tax credits apply to students attending
eligible post-secondary schools in Arkansas, Illinois, Indiana, Iowa,
Missouri, Nebraska, and Wisconsin. For a list of counties, view table
3-2 on page 27 in the
IRS Publication 970,
Tax Benefits for Education.
Claiming the Hope or lifetime learning credit in 2008
Generally, the Hope credit is available for the first two years of
higher education. It is equal to 100 percent of the first $1,200 paid
for qualified expenses (tuition and required fees) during the year,
plus 50 percent of the next $1,200 in expenses for a maximum of $1,800.
However, college students in Midwest disaster areas may be entitled to
a credit of up to $3,600.
As an alternative, the lifetime learning credit is available for
any year you attend a post-secondary school. In general it is equal to
20 percent of the first $10,000 paid in tuition and required fees for a
maximum of $2,000. But if you attend college in a disaster area, your
credit may be as high as $4,000.
Who qualifies in 2008?
To qualify for either the Hope or lifetime learning credit in 2008,
your modified adjusted gross income (AGI) must be less than $116,000 if
you are married and $58,000 if you are single or head of the household.
Access the IRS Publication 970, Tax Benefits for Education,
for more information on who qualifies for the special double credits
and the differences between the Hope and lifetime credits.
Claiming the Hope or lifetime learning credit in 2009
Through the
American Recovery and Reinvestment Act of 2009,
there is an additional alternative. For 2009, Congress amended the Hope
credit for all students by extending it to the first four years of
college and increasing the maximum general credit to $2,500 per
student.
Who qualifies in 2009?
For 2009, the income limit was increased; therefore, to qualify for the
enhanced Hope or lifetime learning credit, your modified AGI must be
less than $180,000 if you are married and $90,000 if you are single or
head of the household.
A choice in 2009
For those attending a Midwest disaster area college, taxpayers have a choice:
- Claim the general expanded Hope credit of up to $2,500 or
- Decline the expanded general credit and use the old 2008 credit
system with the doubled limit ($3,600 through Hope or $4,000 through
lifetime learning)
These credits have an income phase out of up to $120,000 for joint returns or $60,000 for single returns.
“Some taxpayers with higher incomes who are phased out of the
special Midwest disaster credit will benefit from the $2,500 general
Hope credit,” explains Sturz.
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Last edited: 24-Feb-10 09:55 PM
