President Barack Obama has asked Congress to make an educational tax credit permanent in hopes of allowing college students and their families to continue receiving a tax break each year.
“I am calling on Congress to make this tax credit permanent so it’s worth up to $10,000 for four years of college, because we’ve gotta make sure that in good times or bad, our families can invest in their children’s future and in the future of our country,” President Obama said about the American Opportunity Tax Credit in the White House Rose Garden on Wednesday, October 13 where he was joined on stage by college students and their families.
The American Opportunity Tax Credit, part of the federal stimulus program which passed shortly after Obama took office, allows families to receive a tax credit of up to $2,500 per student per year for four years, for a total of $10,000 per student.
The $2,500 American Opportunity Tax Credit was created as a $700 per year improvement to the already-existing Hope credit, which offered a $1,800 tax credit for the first two years of post-high school education as opposed to four years.
According to the IRS website a taxpayer who pays qualified tuition and related expenses and whose federal income tax return has a modified adjusted gross income of $80,000 or less ($160,000 or less for joint filers) is eligible for the credit.
The credit is reduced ratably if a taxpayer’s modified adjusted gross income exceeds those amounts. A taxpayer whose modified adjusted gross income is greater than $90,000 ($180,000 for joint filers) cannot benefit from the American Opportunity Tax Credit.
Reuters, the world’s largest multimedia news agency, also explains that the American Opportunity Tax Credit is refundable up to $1,000 per year for low-income families, which means that taxpayers whose tax liability is less than the full $2,500 credit can get as much as $1,000 of it refunded to them.
Although the tax credit is set to expire at the end of 2010, President Obama now believes that it is an “economic imperative” to make college more affordable. Citing a report by the Treasury Department released October 13, President Obama said that during his first year in office, his administration had increased tax credits for higher education by over 90 percent. He feels that the United States government should make it possible for all of America’s working families to send their kids to college.
President Obama wants the United States to lead the world in the proportion of college graduates by the year 2020 and according to NBC News, the White House estimates the cost of keeping the credit at $58 billion over the next ten years.
President Obama’s request to Congress to extend the American Opportunity Tax Credit is his latest attempt to appeal to college students during the election season. Exit polls from 2008 found that 55 percent of new voters were between the ages of 18 and 24, and those young first-time voters strongly backed Obama.
A poll conducted by the Associated Press and MTVu, MTV’s 24-hour college media network broadcast on college campuses and in college communities, has found that college students are now “cooling in their support” for the President.
The survey of over 2000 undergraduate college students aged 18 to 24 conducted last month found that 44% approve of the job Obama has been doing as President while 27% are unhappy with his results.
A similar May 2009 poll, however, found that 60% of students approved while 15% did not.
Counselor to the Treasury Secretary Gene Sperling, who was part of the Clinton administration, has called the American Opportunity Tax Credit the “next big step” when it comes to college tax credits.
Bob Scharin, a senior tax analyst with Thomson Reuters, says that the education tax credits are likely to be rolled into the massive tax legislation that Congress will start during a planned lame duck session after the November elections, but because the tax credit runs through 2010, it could be deferred until 2011 and then considered retroactively.
Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.
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