TaxAlmanac:Featured article/September 10, 2009

From TaxAlmanac

Back-to-School Tax Breaks, Popular 529 Plans Expanded, New $2,500 College Credit Available

Back-to-School Tax Breaks, Popular 529 Plans Expanded, New $2,500 College Credit Available

In support of the Administration's efforts to promote access to and the affordability of college education, the Internal Revenue Service today launched a new Web section highlighting various tax breaks and 529 plan changes designed to help parents and students pay for college.

The new Tax Benefits for Education section on IRS.gov includes tips for taking advantage of long-standing education deductions and credits. The “one-stop” location for higher education information includes a special section highlighting 529 plans and frequently asked questions. The Web section also features two key changes that will be in effect during 2009 and 2010 that were included in the American Recovery and Reinvestment Act (ARRA), enacted earlier this year.

One change allows families saving for college to use popular 529 plans to pay for a student’s computer-related technology needs. Under the other change, more parents and students will be able to use a federal education credit to pay part of the cost of college using the new American opportunity credit.

“With many families struggling to afford college, we want every eligible taxpayer to know about their options and take advantage of all the tax breaks they can,” said IRS Commissioner Doug Shulman. “529 plans have become a very attractive way to save for college, and our Web section is designed to help people get information about these plans. In addition, the new American opportunity credit can help many parents and students pay part of the cost of the first four years of college.”