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The American Recovery and Reinvestment Tax Act of 2009 (2009 Recovery Act), which provides billions of dollars of tax relief, includes a New York City tax credit for individuals seeking a college education. This provision may benefit your income taxes in Manhattan as a parent of a child working toward a college degree.
There are many federal tax incentives available to help reduce the costs of higher education. Some of these incentives offer tax breaks for current educational expenses, such as the above-the-line deduction for qualified tuition and related expenses, and the Hope scholarship and lifetime learning credits. In lieu of claiming the Hope scholarship credit, the 2009 Recovery Act provides an “American Opportunity” tax credit for 2009 and 2010. This credit may be able to help you save money on your income taxes in New York if you qualify.
Eligible Manhattan taxpayers may claim an American Opportunity tax credit up to $2,500. The credit is determined as 100% of the first $2,000, and 25% of the next $2,000 of tuition and related expenses paid during the year. Forty percent of the credit is refundable.
Unlike the Hope credit, the American Opportunity credit is not limited to the first two years of post-secondary education. Also, the American Opportunity credit covers “course materials” such as books. This credit phases out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).
Educational incentives can provide significant New York City income tax relief for families. The American Opportunity credit is one of several tax options related to saving and paying for higher education. Some may be more beneficial than others in your specific circumstances. Maximizing the benefits of the education tax breaks requires careful planning, particularly because of the interrelationship between the rules that apply to each provision. It is important to go to a CPA who is experienced in dealing with income taxes in New York. At MEDOWS CPA,We can help you sort through the options. Please call our office of income tax CPAs in Manhattan to arrange an appointment at your earliest convenience.
About us: MEDOWS CPA, PLLC is a boutique New York CPA NY Firm serving the needs of Individuals & Small Businesses in New York City and throughout the nation. We work with the self-employed, freelancers, LLC, C-Corporations and S-Corporations to help them with their accounting and tax needs.
Jonathan Medows, CPA
MEDOWS CPA, PLLC
A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses