Obama's College Tax Credit: The American Opportunity Tax Credit
Friday September 5, 2008
Barack Obama has suggested that, if elected, he would introduce a new tax credit that would make college much more affordable for American families. While details are still forthcoming, here's the quick hit list about the credit.
Name:
The American Opportunity Tax Credit
Amount:
$4,000
Who Gets It:
No word yet... Speculation is that everyone making less than $250,000 will get some type of credit, but there may be a phaseout as a family's modified adjusted gross income (MAGI) approaches $250,000.
Other Details:
This is a fully-refundable credit, which means that even if you pay no income tax, you'll still get the money paid to you from the IRS.
For a more detailed explanation, take a look at my write-up of the American Opportunity Tax Credit.
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What do you think of Obama's proposed tax credit? Discuss it in our Saving for College forum.
Comments
Parents of college bound kids can already take $4,000 of their 2007 taxes for college tuition and fees. Obama is saying anything new!
Obama is actually offering a tax credit, not a deduction. They’re very different.
A $4,000 deduction might only save $600 – $1,200 on taxes when you file. A $4,000 tax credit actually saves you $4,000 when you file, since it is directly applied against what you owe.
This sounds like a great idea, but once again, but like everything Obama plans to do -it does not benefit families making over $250,000/year. I wish I knew ONE THING he was planning on doing for those families.
A $4,000 college credit with 100 hours of service amounts to pay of $40 per hour. Prorated over a year this is the equivalent of earning a salary of $83,000. How many 18 year olds have any skill to offer that is worth $40 per hour? Also, what new government agency will be formed to monitor this program and to what cost?
Just more entitlements. I paid my own way through college, my husband and I paid for our children’s college education, and now I will be paying an entitlement to college students. And, by the way, who ever said college is a “right”. Grow up! Take care of yourselves and quit taking from government.
In order to receive funding from FAFSA, you must sign up for what could potentially draft me into the U.S. military. I am a homosexual agnostic whose personalized belief system does not match that of our armed forces, for the most part anyway. I was forced to drop out of high school because of the many death threats and dropping grades from avoiding school. My parents have since divorced and neither are willing to help pay for my college, while i’m working at a job for less than $8/hr overnight. I do volunteer with 4 different non-profits and community organizations, as well as consistently working with community groups for 5 years. Obama’s plan will create many new employment opportunities and is another tiny step towards solving our financial crisis. If it weren’t for this, it would not be possible for me to take a Spanish class to become a flight attendant. Just because you stink of privilege does not give you reasonable cause to attack what America so desperately needs right now. It’s a tax cut! That does not mean you’re paying for it, you bitter bitter woman.
I’m excited about the $4,000 credit. I’m saving now to start a Masters program and it would definitely help me if the final plan includes graduate students.
The top 1.5% of households making over $250,000 do not need more government aid/breaks (http://www.mybudget360.com/). These wealthy folks use more resources and should pay more taxes — tax breaks for income over $1million have reduced tax revenues in this country and I look forward to the end of them.
It is an overwhelming majority of Americans that Obama’s
My response got cut off. I was going to end with a comment that more than 98% of households make less than $250,000 according to the link above. The $250,000 cut off point for Obama’s plans helps an overwhelming portion of American households. America needs more supportive programs and tax incentives for the lower and middle classes.
$40 an hour for high school seniors? It is an appalling entitlement, and we cannot afford this – we have to raise taxes, cut spending and get this economy back on track. Everyone needs to grow up, accept responsibility. I worked full-time and put myself through college (full-time) while doing that- what a bunch of coddled babies.
To those who keep calling this an entitlement and focus on $40 an hour are missing the point of this initiative. This is about creating an opportunity to give people an education where there was none. This is an investment in the future of this country. To be competitive in a global economy we must fund these types of initiatives. The community service is just to ensure that this does not become a handout for those who are not willing to work for it.
The idea is like FDR’s CCC (Civil Conservation Corp) with a revitalization for America in two ways. One: America will benefit b/c students will need to put in community service to earn the money, like cleaning up streets, planting trees, mentoring kids, etc. Two: it will create a wave of educated and skilled people, which America is in desperate need of. With the rising cost of tuition, many people – especially non-traditional or “older” people – cannot afford a college education. Through this program, we can finally reclaim some of the things that makes this nation great. Yes, the payout may be great… but the payoff will be much greater.
I am a high school student bound for an in-state college for the fall of 2009. after hearing this tax cut President Obama is planning on giving college students and their families, I am greatly thankful for the opportunities the tax cut could present for not just my future, but the future of younger kids like myself. Yes, a portion of my generation may be irresponsible and undeserving of these very generous tax cuts, but the truth of the matter is that there are a lot of kids who truly want to better their lives. We are the future and if people don’t give us the benefit of the doubt kids will start believing they don’t deserve education or even worse, they will get over school all together. In the economical crisis America is facing, education is key. If my generation is expected to clean up the mess that WE have all created, then our education shouldn’t be too much of a problem right?
I understand the idea of putting yourself through college and not relying on the government, but tell me how I am supposed to continue on in college when my mom has just lost her job, my dad is disabled and lives off a minimal social security income, and I am already doing my maximum work-study hours and do not have the time in the day to take on another job and successfully complete each of my college courses? This first year of college has wiped out my $8,000 college savings. My tuition + room and board amounts to $35,385 a year, and that’s only rising.
Those who whine about this cut are not wrapping their heads around every situation out there. Just because some people are able to go to a public university in their state (or whatever the situation may be) doesn’t mean that everyone can do that, either. Some majors aren’t offered everywhere. I’m sure you’ve noticed schools aren’t of the same quality everywhere, as well. It is ridiculous to believe this $4,000 cut is unnecessary. I’m just hoping this actually will fall into place soon.
Funny how a lot of people cry about “entitlements”. Many of these are the same people who are currently or who will soon benefit from trillions in Medicare and Social Security spending, social programs that are being funded by the younger generation (but will not be available to them when they retire). The American Opportunity Tax Credit is a great idea; education is worth so much more than money, and the cost really is a drop in the bucket compared to the cost of many other social programs.
I think it is great idea for these families to have help-
1.anyone making over $250,000 is well able to survive in the united states in most any city-having every need met, if they aren’t- they should maybe downgrade their 9 bedroom house and live in a home like middle class America has to.
2.who cares what the 18 year old has to give vs. a 40 year old- the 18 yr. old will be doing all the same service that is expected of a grown man or woman. They have these people do community service-
Examples of community service projects include (but are not limited to):
cleaning a park;
collecting much needed items including clothes, shoes, food, blankets, etc.;
getting involved with Habitat for Humanity;
cleaning up the side of the highways or roads;
reading to the elderly in nursing homes;
helping out a local fire or police department;
helping out at a local library;
tutoring developmentally disabled children for free
participating in school activities that benefit the community
They will not be asked to do anything that requires a college degree.
Maybe this is just what we need in our country- Gov. “help” that you actually WORK for- and learn to give a little back in the process.
Anyone that has a problem with people having the opportunity to go to school is a fool. and a greedy one at that.
Maybe one day after you have exhausted all your energy complaining and fighting this bill… and we are through with a global depression (if we see the end of it) your grand children or great grandchildren may NEED this bill to make it anywhere in this world. For once maybe you should think ahead-
and think of others- and maybe you will grow to understand the spirit of giving.
How dare some of you claim that this cuz isn’t necessary. It’s very easy for you to say get a job and pay for school when you come from money and have people helping you and connections to obtain a good job. When your 18 and in college fulltime with a fulltime job and two disabled parents, it’s kind of hard to make ends meet. When you make 250,000 a year you really don’t need help from the government if you live modestly. However, like me many need assistance from the government to eat, go to the doctor and go to school. Now tell me what you think I should do other than be a little bit hopefull. Send my sick parents out to work? Take on another job and fall behind on my schoowork? Or can I take the help that our government is using to make my life just a little bit easier. DOn’t be so quick to judge when you don’t know what others are going through.
Katrina, your story sounds very familiar. I go to a public college and almost everyone I know has a very similar problem. We all chose this school because it was a good school, but each of us turned down our first choice private schools because there was no way we could afford it.
My parents can’t afford to pay for my education like some can. We’ve been forced to take out private loans and I work more hours than most college students, I carry two jobs during the school year and another full-time when I’m home on breaks, but that’s not enough to cover everything.
I’m typically against such programs, but tuition and other college costs are increasing out of control, way past the rate of inflation. I would argue that this is only treating a symptom, perhaps we should focus on fixing the system of higher education, but for now I do think it is necessary.
chris you idiot if you make that much you don’t need help, come on man grow up
I think it’s great and I know it would benefit so many college students like myself. Most students may not take the opportunity, but those who actually are trying to better their lives and are willing to work to recieve this tax credit as well as working part-time or full-time AND still studying are obviously deserving of it.
When you live in a single family home with three other brothers and sisters who are going through college as well, it’s not so easy. Although we all are paying for ourselves, it’s because we don’t have the salary like those making $250,000 or more do. And those who have said they’ve put themselves through school back in the day, sorry to break it to you, but tuition has since raised. We aren’t just “coddled babies” depending on the government to bail us out, we’re trying. We don’t come from money as I’m sure you did. And your children are paid for by you since you’re making that $250,000, they aren’t in need of the help that so many others are.
I am a veteran and after serving ten years in the military, my GI Bill only covered about three years of college. I welcome the idea that the youth of our country may serve it in a manner that does not demand the sacrifice of their life, while they are able to earn money for their education.
Now, as a nurse, I appreciate the fact that I will someday need medical assistance from someone who will attend college today – I want them to concentrate on their education, rather then their debt!
Although many of us have encountered difficulties accessing college, I believe that as we become more educated and critically think about problems, we realize that perpetuating a barrier to education is not the answer we need for the future.
I welcome the program proposed by Pres. Obama and believe that while we may not all directly receive funding, we will receive the benefits as our communities flourish with the energy of youth involvement!
I honestly think that this will be underutilized by many. I have no clue how they are going to keep track of the community service, but I imagine that it will make the out of pocket cost more around 6,000 per student using it. My situation is no different. I work full-time +, about 55 hours a week, take 16 – 20 credit hours a semester, and have 2 children that have extra curricular activities that I make time for. I make decent money, but it barely gets me by. I do not receive any pell grants, only student loans. I am part of the generation that is never going to see the social security benefits that I have been paying into since I was 14. I have never used the government for anything and if college was more affordable I would never use this benefit, leaving for others that need it more. I will owe around $80,000 in loans when I get my bachelors. I have to go to school online because of my children, or I would go somewhere cheaper. Regardless of this bill I will finish college and I will pay for it, but it’s nice to know that Obama understands the expense of college and is looking for a way to help with it. For all I’ve paid to live and work in America, I am not going to be ashamed to get back $4,000 to use for something that will help me be able to help others. Quit critizing and put yourself in the shoes of those that can and will use this. They’ll pay it back. College degree leads to better job, better job leads to paying more in taxes every year. It’s the government, they don’t do anything that won’t help them in return.
The tax break should go towards kids whose parents make over 250,000 because these kids will most likely be able to contribute more highly to society when they graduate.
Alex, you’re a troll aren’t you? I myself do not view the tax break as NECESSARY, but it is, however, quite nice and I may or may not take advantage of it. Perhaps that would be a moochy thing to do, but I’m certainly willing to “volunteer” ($40 an hour is ridiculously generous) for a scholarship. Heck, I’d do the same number of hours for half or even a quarter as much money. Is it available for everyone? That’d be pretty awesome.
By the way, since everyone else is describing their situations, I’ll describe mine: I go to school completely paid by scholarships with no cost to me even after books and probably after gas money for the year. I live at home, pay no utilities, have no kids to take care of and no financial obligations or even a job right now (though I am looking). I don’t even pay for my car or gas or EVEN cell phone. Pretty sweet huh? But my family does not make even close to 250k a year, we just manage to live fairly frugally and don’t spend more than we have. ^_^
Oh, and I have siblings, so I’m not an only child either.
What Alex says above is exactly what is wrong with this country. “The tax break should go towards kids whose parents make over 250,000 because these kids will most likely be able to contribute more highly to society when they graduate.”???? What the heck? Not everyone is born with a silver spoon Alex, grow up. I sure could have used the help when I put myself through university a couple years ago through work and loans. There was no way my parents who make less than $50,000 combined could pay for me so I did it the only way I could. I’m also glad to mention that I’m almost done paying my loans so hopefully I’ll be able to help my sisters who just started college and my wife who is working on her masters as well. Grow up people, this is about all of us helping each other and those that want it and need it!
Carlos, Alex was just trolling you guys. If he really meant that, that make him about as intelligent as a used douche bag.
I am torn with this initiative. Being a college student who has paid his dues in the private sector I am able to keep my head above water while I attend school. However, not only will I enjoy the benefits of this legislation, I am excited that other students are getting the opportunity to attend school.
However, there isn’t a single person on this board attending college that should turn the blind eye to the fact that if you make college degrees easier to obtain, your college degree will be worth less. It’s strictly numbers. The reason that most higher pay scale jobs require a degree is because the employer realizes the individual was willing to sacrifice and stay on task to reach the goal. High school diplomas are not worth as much because 1: They are easier to obtain and 2: The majority of Americans have one. If it is not in demand (because they’re easier to obtain) then they lose value.
Just my two cents…
True, but this will provide aid for those who are unable to attend college normally to be able to afford it. Of course, we could follow Japan and have College entrance exams and let THAT base who gets into college…that way, morons with money wouldn’t be able to sully the halls of knowledge with idiocy and make me rage.
^_^
Get real people. This wasn’t Obamas idea, it was Chakka Fattahs. Read up and stop the blind worship….besides, if you live in an area like New York and make 75k you are SOL for any govnerment help. That my friends is the bare minimum almost needed to make it in NYC. This is simply redistribution of the wealth. However, what the govt. reallys knows is those that make next to knothing really couldn’t care less about college anyway and aren’t going to use this. It all sounds great, but its only used to garner votes from deadbeats.
Honestly, how many kids in high school actually have 100 community service hours? This plan will give more incentive to those who need this money rather than those who are too lazy to volunteer. Also, this will greatly help seniors(like myself) to pay for the increasing cost of college living.
I think this is a great idea!…as for him doing anything for families who make over $250,000 and CAN afford college I dont see a point. What else can he do for families who can afford to send ALL of there children to college? My family made less than $40,000 last year and because of that I wasn’t able to continue my college education. Now that my sister will be attending college soon I’m glad that he will give people like me and opportunity to afford college and succeed in life.
Take out a loan if you can’t afford it! No need to give more handouts.
What’s funny is that for once this isn’t a handout. I’m a college student (graduating in two weeks). Thanks to scholarships, grants, and a decent job I’ve been able to pay my way through without too much debt. That’s mainly because my dad is dead any my mom is disabled, so my combined family income is under $20,000. I do have friends though whose parents have worked hard and now are forced to take out thousands of dollars worth of loans just to send their children to school. They make just enough to not qualify for aid but not enough to actually afford tuition. Now, personally I don’t think it’s fair to those parents, who have WORKED HARD and payed their taxes, to be denied aid. But to give them the opportunity to get a tax credit for their son or daughter volunteering (not just giving them money, making them work for it) is an amazing idea. Grants that help those who are in my position are just given out freely. Why shouldn’t people who work hard be able to get a break every now and then too?
Besides, the volunteer part will ensure that people who deserve it will get it. In order to volunteer you have to fill out lots of paper work, get reference letters, and the like. So people who are lazy are not going to see a cent of that money.
I do have a job (I had one before I started college too) and I do pay taxes. I’ll be paying taxes when I get out of school too. And I am not the least bit upset that my money might go to a program like this. Something should be done for those people who are stuck in the middle instead of just the poorest poor (even if technically I am one of the poorest poor :S lol).
and** not “any”
And btw… the pell grants and stuff I’m receiving, those are handouts. And there are lots of people who get them and then never finish college. Now that’s a waste of money. If we were to change the requirements for pell grants and the like so that everyone had to do something to get money you’d see a lot less wasted money. You’d get more people who actually WANT to get an education. And you might even save enough to expand pell grants so that people who make enough to get by, but not enough to afford tuition, might be able to benefit from them as well. I know it’s biting the hand that feeds me, but Handouts aren’t fair. So why fight against a bill like this when it isn’t one?
I think there will always be people who simply don’t understand that their lives have been easier than others because they were raised by people who thought the same. Any help is a ‘handout’ to someone who’s a bit spoiled because he or she has probably never really been discriminated against or unfairly treated.
I come from two extremely hard-working, white, middle class parents. When I was growing up, we were kind of poor; now my parents live in a practical mansion filled with antiques. They busted their butts for everything they had. Thankfully, they saw the kids who had country club lives and weren’t part of that crowd. Now that they are older and richer, they still associate with what it’s like to be someone who struggles.
I fear ever judging another person, calling him or her lazy, because in the end, that type of judgment could come right back on me.
Besides, I’d rather see this money going towards education than other useless programs out country supports. The ketchup guy in the Pentagon? Remodeling a private bathroom for a judge? Half a million dollars for White House china?
Where do I puke?
I’m pretty sure fiscal conservatives should be for this, since it is a tax credit (not to mention one for education). You people are morons.
This whole concept of people making over $250,000 as being rich [explicative deleted] who deserve absolutely nothing from the government is kind of ridiculous. Yes, generally people in this income bracket have more resources but it is not always that clear cut. For example, my family is in that income bracket, but we have two college age kids who’s majors AREN’T offered at the state school (for both of our career paths, both of us are really better going out of state in the long run and that’s just the truth). Neither of us are getting any significant financial aid so that’s basically amounting to $80,000 a year. And just about 4 years ago, Katrina came swooping through and destroyed our house and with it everything we had. I don’t know if you’ve ever had to buy a new house, rent an overpriced apartment, and refurnish everything but it sucks. And it’s expensive. And we had insurance! So trust me, our household could definitely benefit from $4000.
I understand this is for upcoming and current students. Is there anything that applies to recent graduates that are trying to pay off their loans? He was supposed to give a one-time credit for that. I have not heard such a thing since the election.
Thanks in advance.
This sounds great but where can u get 100 hours of service at? I live in Ohio and there are like no jobs.
“This sounds great but where can u get 100 hours of service at? I live in Ohio and there are like no jobs.”
As of right now, they have dropped the 100 hours of service requirement. However, if it is required, they’re volunteer hours, not work hours.
You should have no problem finding organizations that need free volunteers!
I understand this is for upcoming and current students. Is there anything that applies to recent graduates that are trying to pay off their loans? He was supposed to give a one-time credit for that. I have not heard such a thing since the election.
What does a family making 250,000 a year need Obama to push for them? Do these families realize there are many parent raizing kids on 20,000 a year and even less. I work two jobs, go to college and raise two kids and only make 34,000 a year. So it is not because I am lazy and expect a handout, my family just needs help to be able to afford college. I am certain someone making 250,000 a year can afford tuition. They probably have hand bags equal to the cost of one semester at my college. Save the complaining and thank God that you are blessed with such an income!
I hope that he does something for college graduates because so many people graduate and then are broke trying to pay off their student loans. I’m sure he will if the Republicans don’t vote him out in 4 years, it will take time to do everything he is trying to get done. I am very pleased with all of his ideas as long as they are eventually put into action. I am still amused by the upeer class families trying to get a tax break, I wish they could live a day in my shoes, they would shut up!
“Is there anything that applies to recent graduates that are trying to pay off their loans? He was supposed to give a one-time credit for that. I have not heard such a thing since the election.”
There was no credit put in place to help recent graduates recover some of their cost. Student loan interest deduction is still deductible however and there all kinds of existing loan forgiveness programs that everyone should look in to.
http://collegesavings.about.com/od/taxbreaksforcollege/a/deducttuition.htm
http://collegesavings.about.com/od/loanforgivenessprograms/Student_Loan_Forgiveness_Programs.htm