On July 24, 2014, the U.S. House of Representatives approved the Student and Family Tax Simplification Act, “designed to make it easier and simpler for families to afford the costs of higher education by consolidating four separate tax provisions into one improved and more robust education tax benefit.” The Hope Credit, American Opportunity Tax Credit, the Lifetime Learning Credit and the Tuition Deduction are now the new American Opportunity Tax Credit.
The new expanded American Opportunity Tax Credit (AOTC) includes the following provisions:
o 100% for the first $2,000 of eligible expenses ($2,000)
o Plus 25% for the next $2,000 of eligible expenses ($500)
Even though the legislation cleared the House on a 227-187 vote, many House Democrats and the White House opposed the bill because they said it would add to the deficit and was not offset by increases in revenue elsewhere in the federal budget.
In addition, a number of educational groups signed a letter from the American Council on Education (ACE) opposing the bill. The letter stated that the bill would negatively impact many low- and middle-income students by eliminating Hope and Lifetime Learning credits since many of those students are adult learners and take longer than four years to complete their degrees.
Stay tuned for future developments.
For more information on how you can minimize tax liability and take advantage of incentives like the AOTC, please contact your Aronson tax advisor or Anatoli Pilchtchikov at 301.231.6200.