More College Savings: Textbook Deduction Proposed & Unclaimed Tuition Credits Found

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After paying the steep costs of tuition, parents and students in American colleges face “shockingly high costs for textbooks in class after class, at school after school,” said Senator Charles Schumer of New York. Schumer has proposed making up to $1,000 of textbook costs tax deductible, his office announced.

In addition, Senator Schumer is proposing a national textbook rental program, Newsday reports. Congress would offer $25,000 grants to colleges to conduct feasibility studies to see if a rental program would work for them. The University of Wisconsin system has long had a rental program where students at the River Falls campus pay a fee of $59. Virgil Monroe, manager of textbook services at River Falls, said “It's quite an expensive system to establish now if you're trying to do it from scratch,” the New York Times reports.

The Government Accountability Office (GAO) has estimated that the average student spends nearly $900 a year on textbooks and supplies. The publishing industry defends the high prices, saying that 28,000 professional hours go into preparing an average new edition, according to the New York Times.

“Textbooks are very expensive to produce, and the market is very small – it's old math,” said Bruce Hildebrand, executive director at the Association of American Publishers.

The GAO report faults publishers for the practice of “bundling” textbooks with CD's and color supplements, which add tremendously to their cost, reports, and are harder to purchase used. The GAO said that the cost of textbooks can amount to as much as 26 percent of the total cost of a four-year program at a public college, said. The GAO also reports that the typical text is being replaced with a new edition every three to four years, as opposed to every four to five years, twenty years ago, according to the New York Times.

In a separate study, the GAO reported that about one in four taxpayers who were eligible for a tuition tax deduction or a tax credit did not make those choices. The GAO studied 1.8 million tax returns filed from 1999 to 2002, the Associated Press reported. The average tax saving for families in that group would have been $169. Ten percent would have saved more than $500. “One explanation for these taxpayers' choices may be the complexity of postsecondary tax provisions, which experts have commonly identified as difficult for tax filers to use,” the GAO report says.

But as a relatively new option, the GAO report says, the number of tax filers using these tax deductions or credits has grown quickly. About half of the tax returns where tuition deductions or credits were not used were prepared by paid tax professionals, the Associated Press reported.

The deduction for tuition was raised and expanded in 2004, according to the IRS. The deduction rose to $4,000 for individuals meeting the $65,000 income threshold for singles and $130,000 for married and filing jointly. However, a deduction of as much as $2,000 is now available for those earning as much as $80,000 if single and as much as $160,000 if married, filing jointly, the IRS said.


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