Today, U.S. Senator Charles E. Schumer announced that his legislation, the American Opportunity Tax Credit (AOTC), has been extended for an additional five years under the fiscal cliff deal reached on Tuesday. This $2,500 college tuition tax credit included in the American Reinvestment and Recovery Act (ARRA), that passed in 2009, provides major aid to middle-class families trying to stretch their pay checks during tough economic times. The college tuition tax credit will continue to make college more affordable for middle class families, and save New York families millions for years to come. The extension of this tax credit was not certain, and Schumer fought for this top priority to be included in the final fiscal cliff package.
"The extension of the college tuition tax credit is great news for middle-class families in New York and across the county," said Schumer. "Today, a college education is incredibly valuable, but also incredibly expensive, and these savings are needed now more than ever. This tax credit provides real relief for middle-class families by taking one dollar off their taxes for every dollar spent on college tuition -- up to $2,500. I'm thrilled it has been extended for an additional five years and will continue to provide real savings for New York families and students."
The Schumer-authored college tuition tax credit was originally signed into law as part of the American Recovery and Reinvestment Act of 2009, but was due to expire at the of 2010. However, Schumer was able to include a 2-year extension as part of the tax package that passed the Senate in 2010. Today, Schumer announced that he has led the charge to extend the AOTC yet again, now for five additional years through 2017.
The legislation transformed the HOPE tuition credit into the $2,500 American Opportunity Tax Credit, for the cost of tuition and related expenses paid during the taxable year. The new Schumer credit represents an overall benefit that is at least two-and-a-half times greater than the previous tuition benefits. Under this tax credit, taxpayers receive a tax credit based on 100% of the first $2,000 of tuition and related expenses (including course materials) paid during the taxable year and 25% of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent of the credit is refundable. This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).
Since 2009, the Schumer-authored college tuition tax credit has saved families thousands of dollars each year. Below is a regional breakdown of the estimated tax savings based on most recent data:
· Families in the Capital Region would save up to $150,970,000 annually.
· Families in Central New York would save up to $161,761,000 annually.
· Families in the Hudson Valley would save up to $178,015,000 annually.
· Families in the North Country would save up to $67,351,000 annually.
· Families in the Rochester Finger Lakes Region would save up to $144,652,000 annually.
· Families in the Southern Tier would save up to $126,512,000 annually.
· Families in Western New York would save up to $156,534,200 annually.
In the last decade, college tuition has skyrocketed across the country in light of rising costs. With the recent tightening in the student loan credit market, more students of all income levels are being forced into borrowing from both federal and private lenders to finance college and they are borrowing in higher amounts than ever before. Others are forced to make tough decisions about whether or not higher education is affordable. According to the federal Advisory Committee on Student Financial Assistance, cost factors prevent 48 percent of college-qualified high school graduates from attending a four-year institution and 22 percent from attending any college at all.