April 28, 2013

Get an Associates Degree for $1696.50

Have you heard of the American Opportunity Tax Credit?   Its a tax credit for college that pays up to $2500 refund.    Your local community college is usually one of the cheapest ways to go to college.   The AOTC will often cover most of the cost of tuition at a community college. 

If you combine the American Opportunity Tax Credit and a reasonably priced local community college you can get a great bargain on a college education.

According to the College Board The average cost of a community college is $3,131 per year for tuition and fees.    The AOTC will cover 100% of the first $2000 of that and 25% of the next $2000.   If your costs are $3131 then they'll pay 100% of the first $2000 and then 25% of the next $1,131 or $282.75 for a total of $2282.75.   That means your cost per year after the AOTC is $848.25.   You can get a 2 year Associates degree for a total cost of $1,696.50.

That would be the best case scenario if you got the full refund, but there are limits.

Now the AOTC is only 40% refundable so that means you have to have tax liability to begin with. To explain this further, if you don't work and don't have any income then you have no tax liability.  Sometimes credits are not refundable so that means they won't give you money if you didn't have a tax bill to begin with.  The AOTC is 40% refundable so you can actually get a tax credit even if you have no tax bill, but only up to 40% of the credit amount.    If you didn't work you'd only get 40% of the $2282 or about $912.    If you worked a part time job for $15 then you'd make enough to get the full credit.   The details will vary based on your exact income level.

There is also an upper income limit on the credit so you can't make too much or you won't qualify.  The limit is $80,000 for single people or $160,000 for families.

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