A new study by the U.S. Government Accountability Office (GAO) found that Americans forfeited approximately $793.2 million of college tuition tax benefits in 2009.With student loan debt soaring by about 300 per cent in the last 10 years, the federal government has been doing a lot to try and ease the burden on college graduates. This includes offering tax credits, like the American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC), and tax deductions for tuition, fees and student loan interest.
Despite such benefits being available, the GAO found that about 14 per cent of the 11 million eligible taxpayers did not claim any credits or deductions. As a result, taxpayers lost $466 on average.
Many who claimed some benefit made the wrong choice and also left money on the table. The GAO approximates that of the 588,000 filers that claimed the tuition and fees deduction, about 40 per cent should have taken the LLC instead. They lost $284 dollars on average.
Clearly, students don’t realise they qualify for any of these deductions and credits. This is probably because the IRS publication that explains the handful of credits and deductions is too long and complicated, says the GAO.
To get more eligible taxpayers to take the proper benefits, the GAO argues, the IRS and the Department of Education need to provide simplified and more transparent information to students about which benefits they are eligible for.
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