New textbook tax credit may disappoint

Year after year, students wait in long lines only to empty their pockets in exchange for textbooks that are usually good for one semester. They must do this with little hope of having that money returned. Those who are lucky enough to have extra money left over from their student loans or grants still have to pay out-of-pocket and pray their balance is deposited before the next round of bills begins to cycle through.

However, in February 2009, President Obama signed a bill that allows students to receive a small refund and a tax credit for their highly overpriced textbooks. This decision, aptly named American Opportunity Tax Credit, was made in effort to help middle and lower class students continue their college education. With this textbook tax credit students can buy their books with the incentive that some of the money shelled out for books may be reimbursed at the end of the school year.

While this new tax credit created under the American Recovery and Reinvestment Act is only temporary, (a permanent solution for student aid is pending), it will be worth up to $2,500 and can be used for all four undergraduate years. According to, a site established to explain exactly how the tax credit works, this credit replaces the $1,800 credit that was previously offered to students for up to the first two years and only covered tuition and expenses, not textbooks. This of course seems like exciting news, but students shouldn’t go on a textbook shopping spree just yet.

Students should be wary of thinking this bill simply gives them $2,500. Although this new textbook tax credit is beneficial, a careful scanning of the plan is crucial to fully understand this potential $2,500 tax credit.

Firstly, the $2,500 is only partially refundable for cash. It might initially seem that the first $2,000 in out-of-pocket textbook purchases, tuition, and fees is refunded 100 percent, but in reality only 40 percent of the credit is refundable, with a maximum cash refund of $1,000. Other expenses exceeding $2,000 will only be credited 25 percent, maxing out at $2,500. The reality is that only a small portion of the money students spend on textbooks will actually be refunded to them; the rest will come in the form of a tax credit.

The average full-time college student takes five classes each semester to maintain their full-time status. Textbook prices can range from $50 to more than $200 and many classes require multiple texts. If a student purchases a book for five classes at $100 dollars a book, their total out of pocket expenses for the school year will be $1,000.

If a student who pays $2,500 for textbooks in a school year only receives $500 in their refund, a student spending only $1,000 will receive even less. While a cash refund is always a great thing, students should be aware of the guidelines involved before assuming a total refund is in store.

After breaking down the bill for those who are not experts in taxes and accounting, the American Opportunity Tax Credit doesn’t seem like the big deal many people are making it out to be. It’s good to know that the government realizes that students still need more help to succeed in college, but don’t expect a large sum of money to come from it when tax season arrives.