Fact Sheet: Education Credits
1) Hope Scholarship Credit:
What it is: A non-refundable credit against your taxes for money spent by students for themselves or their dependent(s) during their first two years of post-secondary education on certain higher educational expenses and during academic periods beginning on or after January 1, 2000, and before April 1, 2001 on at least a half-time basis. It can be worth up to $1500.00 for each eligible student.
How you get it: File either a Form 1040 or a Form 1040A, and attach Form 8863. You cannot claim this credit on a Form 1040EZ.
Rules:
1) Only certain expenses qualify for this credit. Generally, tuition, books, and required supplies qualify. Optional activity fees, insurance, room and board, transportation, personal, and family expenses do not qualify.
2) The amount of expenses you are claiming credit for must be reduced by the amount of tax-free funds you received in payment of those expenses (e.g., scholarship money). If the student is the beneficiary of an education IRA he or she may waive the tax-free treatment of those benefits and then claim the credit.
3) Expenses paid for enrollment in a college, university, vocational school, or other post-secondary educational institution can be used to calculate the credit amount. If the school is eligible to participate in the United States Department of Education student aid program, it will qualify as a valid educational institution.
4) You can’t claim the Hope Credit and Lifetime Learning Credit for the same expenses.
5) Payments made by a third party directly to the educational institution can qualify the student to claim the credit provided the student is not the dependent of the payor. So, if a grandparent pays the tuition for his or her non-dependent grandchild, the student or the parent (if the parent is claiming the student as a dependent) may claim the credit.
6) If you are a dependent on someone else’s tax return, then you may not claim the credit. Only the person claiming you as a dependent may claim the credit.
7) If you or the person claiming the credit had more than $40,000.00 in income during 2000, the amount of the credit is reduced. If you or the person claiming the credit had more than $50,000.00 in income during 2000, you cannot claim the credit at all. For married couples filing joint returns, these amounts are doubled. You figure these amounts on Form 8863 when you file your tax return.
2) Lifetime Learning Credit
What it is: A non-refundable credit worth up to $1000.00 per eligible student against your taxes for academic years beginning on or after January 1, 2000, and before April 1, 2001.
How you get it: File either a Form 1040 or a Form 1040A. You cannot get this credit if you file a Form 1040EZ. Attach Schedule 8863 to your tax return.
Rules: The rules are the same as for the Hope Scholarship, except for the following:
1) You can claim this credit for course work to acquire or improve your job skills, in addition to expenses paid for post-secondary education.
2) The student doesn’t have to be enrolled at least half-time.
3) Remember there are income limits, and you can’t claim this credit and the Hope credit for the same expenses.