filing-the-fafsa-2015-2016-edition

Filing the FAFSA 129
Maximizing Education Tax Credits
The American Opportunity Tax Credit provides a $2,500 tax credit based on the first $4,000 in college
tuition, required fees and course material expenses. Since IRS rules prevent double-dipping, one cannot
use a tax-free scholarship or a tax-free distribution from a 529 College Savings Plan to pay for expenses
that justify the American Opportunity Tax Credit. Instead, the parents will need to pay for these expenses
with cash or student loan money. This may affect the parent’s strategy for spending down student money
first. The parents should consult with their tax preparer, accountant or financial planner about how best
to maximize eligibility for the American Opportunity Tax Credit and other education tax benefits.
Appeal for More Financial Aid
If the family has unusual financial circumstances, ask the college financial aid administrator for a
professional judgment review of those circumstances. These can include changes in income or the net
value of assets from last year to the current year and anything that distinguishes the family from the
typical family. See the discussion of “Adjustments” below for additional details about how to appeal for
more financial aid.