Solution to fiscal cliff spares students and their families from a heavy tax burden

When the federal government finally approved a solution to the fiscal cliff that Americans faced at the beginning of 2013, the families of college students were among the taxpayers who benefitted most from the bipartisan solution.

If a legislation was not passed by January 1, the parents of college students would have lost an important tax deduction that they could qualify for if they gave their students help paying for college.

According to the latest data from the U.S. Government Accountability Office, more than 9 million tax filers claimed the American Opportunity Tax Credit, receiving a total of $16 billion in benefits for tax year 2009. If a parent qualifies for this program, they can to receive a tax credit of up to $2,500 for each of the up to four years their student is enrolled.

Had the new fiscal cliff solution not extended this tax credit to 2017, the credit would have been reduced to only a two-year span, offering parents only $1,900 in tax deductions.

The new solution also extended the income levels of qualified applicants, allowing for a maximum salary of $80,000 for single filers or a combined $160,000 joint income for dual applicants.

In 2012, taxpayers were also able to deduct up to $4,000 in tuition and fees as an above-the-line exclusion from income when they filed for taxes. This was also extended under the new solution, essentially allowing some parents to qualify for a lower income bracket when they file their taxes.

For the 2011-2012 academic year, families across the nation were able to enjoy roughly $18.2 billion worth of these tax deductions which helped to make financing an education a more affordable experience. If current trends continue, students and their families will need even more financial aid options in the years to come.