Jackson Hewitt Reminds Taxpayers to Study Up on Education-related Tax Credits and Deductions

New American Opportunity Tax Credit Increased and Expanded


PARSIPPANY, N.J., Aug. 5 // PRNewswire-FirstCall // -- According to U.S. Census Bureau projections, approximately 19 million* students are expected to enroll in colleges and universities across the country this year, and many others will participate in continuing education programs. As the new school year approaches, Jackson Hewitt Tax Service((R)) reminds those heading back to the classroom about an important increased tax credit and other tax deductions that are available for post-secondary education.

Through the American Reinvestment and Recovery Act of 2009 (ARRA), signed earlier this year, the credit formerly known as the Hope Credit will increase to a maximum of $2,500 of eligible expenses for the first four years of post-secondary education. This expanded credit is now called the American Opportunity Tax Credit and is available for tax years 2009 and 2010. The credit also includes the cost of books and software required for courses.

"To provide parents and students with additional assistance in financing post-secondary education, the federal government has increased the amount of the American Opportunity Tax Credit to $2,500 -- up from $1,800 -- and has extended the credit to also cover certain class-related expenses like books and software," said Mark Steber, chief tax officer, Jackson Hewitt Tax Service. "It's important for taxpayers to be aware of this change and to keep proper documentation so that they can claim relevant education credits and deductions when filing a 2009 tax return."

Other notable education-related tax credits and deductions include:

  • Deductions for Computers and Other Expenses: For tax years 2009 and 2010, the cost of Internet access and technology, such as a laptop or desktop computer, are considered qualified distributions from a section 529 (college savings) plan. Students enrolled in an eligible institution can use tax-free distributions from the program to pay for these qualified education-related expenses.
  • Lifetime Learning Credit: This credit is available to an individual paying qualified tuition and related expenses at an eligible postsecondary educational institution. Unlike the American Opportunity Tax Credit, students are not required to be enrolled at least half-time in one of the first four years of post-secondary education. Nonresident aliens generally are not eligible to claim the Lifetime Learning Credit, and a taxpayer cannot claim both a Lifetime Learning Credit and American Opportunity Tax Credit for the same student in the same year.
  • Tuition and Fees Deduction: This deduction covers up to $4,000 in expenses for enrollment or attendance at an eligible educational institution and is available to those with a modified adjusted gross income of $65,000 or less ($130,000 or less if Married Filing Jointly), but no more than $80,000 ($160,000 if Married Filing Jointly).
  • Deductions for Teachers' Expenses: Education workers (such as elementary or secondary school teachers, instructors, principals, or aides) who have worked at least 900 hours during a school year may deduct up to $250 of eligible expenses directly against their income. Common expenses that can be deducted include the cost of books, supplies, computer equipment (including software and services), and other materials used in the classroom. It is not necessary to itemize to claim this deduction. Remaining expenses can be deducted as a miscellaneous itemized deduction on Schedule A, subject to the 2% of adjusted gross income limit.

"It's critical to keep the right documentation," cautions Steber. "Receipts from the educational institution showing the amount paid for tuition and fees or canceled checks or bank statements are all adequate for verification. If your payments included amounts charged other than tuition and fees, remember to save a copy of billing documents from the school that break down the charges individually."

Many Jackson Hewitt offices are open year-round to assist taxpayers and answer a range of questions related to tax benefits, including credits and deductions for education.

About Jackson Hewitt Tax Service Inc.

Jackson Hewitt Tax Service Inc. (NYSE: JTX), with approximately 6,600 franchised and company-owned offices throughout the United States during the 2009 tax season, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey.

* Source: U.S. Census Bureau http://www.census.gov/Press-Release/www/releases/archives/facts_for_features_special_editions/013847.html; Upcoming Statistical Abstract of the United States: 2010, Table 214 http://www.census.gov/compendia/statab/

SOURCE Jackson Hewitt Tax Service Inc.

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