Happy New Year!!!!

Well, it's December 31st and this is a significant date inthe world of financial aid. First of all the 2010-2011 FAFSA will be available tomorrow for completion!! Make sure you have a pin number and remember, you will be estimating your 2009 income to use on this form until the actual returns are filed.

Secondly, beginning for the 2009 tax year, the federal government has put into place what is called the American Opportunity Tax Credit. This tax credit takes the place of what was previously known as the Hope Tax Credit. It is improved from the Hope credit in several ways. The maximum credit which will be available for 2009 and 2010is increased to a maximum of $2500. Taxpayers will receive a tax credit based on 100percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year. This is different that the tuition and fee deduction which adjusts the gross income. You can't take both the tution and fee deduction and the tax credit. For most people, the tax credit is more beneficial because it actually lowers the tax liability rather than just reducing the income by a certain amount. For more details, see the following link:

www.irs.gov

There are certain income limitations and other relevant information. Once in the IRS website, put American Opportunity Tax Credit in the search engine for a Q and A.

FAFSA worksheet can be deceiving

For those who will be completing the 2010-2011 FAFSA soon after 1/1/10, you can use the FAFSA worksheet to prepare yourself for the form online. However, in the Department of Education's attempt to respond to the request of the Obama administration to simplify the FAFSA process, the questions on the FAFSA worksheet have been reduced to about 37 questions from last year's 53. However, once you answer a question on the FAFSA, you may be required to complete additional questions that don't appear on the paper worksheet. For example, if you completed or will complete a 1040 tax form for 2009 and are required to do so by the nature of your income (self-employment income or you itemize your deductions, among others), the form will then ask about assets held by the student and the parents. Again, there is no asset question on the FAFSA worksheet, but that doesn't mean you won't be asked once applying online!!! Make sure you complete the FAFSA worksheet as accurately as possible as incomplete data will delay the processing of the FAFSA.