The Hope Scholarship Credit
Hope Scholarship Credit - What is it?
The Hope Scholarship is actually a tax credit, not a scholarship. On a tax return, a tax credit is subtracted directly from total tax owed. In contrast, a deduction (i.e. mortgage interest) reduces taxable income. This tax credit is not refundable – it can only reduce the tax you owe to zero. A taxpayer can calculate and claim this credit on the IRS Form 8863 – Education Credits.
Who can claim this credit?
An individual or family can claim the credit for a student who meets the following requirements:
Is enrolled in one of the first two years of postsecondary education at any institution (the credit may be claimed in no more than two years for each student), Is enrolled in a program that leads to a degree, certificate or other recognized educational credential, Is taking at least six credit hours at GRCC for at least one academic period beginning during the calendar year, and Is free of any felony conviction for possessing or distributing a controlled substance.
The student can claim the credit if the student files his or her own tax return and claims a personal exemption. If a student is claimed as a dependent by another taxpayer, that taxpayer claims the tax credit. It does not matter who paid the tuition. The taxpayer is eligible for the maximum benefit with an Adjusted Gross Income of up to $58,000 for a single taxpayer (or $116,000 for married taxpayers in
2008). The credit amount is phased-out between $47,000 and $58,000 for single taxpayers (or $96,000 and $116,000 for married taxpayers in
2008). See IRS website for income levels applicable for 2008.
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How much is the credit?
The credit is based on the amount of tuition and qualified expenses (examples given below) paid for a student who meets the criteria defined above. In computing the credit, qualified tuition and expenses must be reduced for scholarships, grants and other tuition benefits (i.e. employer-paid tuition programs). In other words, only amounts paid "out of pocket" are eligible for the credit. Tuition and qualified expenses paid through a student loan can be applied toward the credit. The credit can be calculated based on the following:
100% of the first $1,200 paid for tuition and qualified expenses,50% of the next $1,200 paid for tuition and qualified expenses. Up to $1,800 for each eligible student who meets the requirements.
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What kind of tuition-related expenses qualify for the credit?
The following GRCC fees would be considered eligible for the credit: class lab/course fees, admission fees, general service fees and technology fees.The following expenses would not be considered eligible for the credit: books and supplies, student activities, transportation/parking, personal/family living expenses, athletic fees, transcript fees, library fees and career testing fees.
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When is the credit available?
The taxpayer may claim the credit on his or her income tax return for the year ended December 31,
2008. The taxpayer must have paid the qualified tuition and expenses in the calendar year of
2008. Taxpayers may claim the credit for tuition and qualified expenses paid in a tax year for an academic period that begins following the tax year (e.g., paying in December
2008 for an academic period beginning in the first three months of 2009).
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The Lifetime Learning Credit
Lifetime Learning Credit - What is it?
The Lifetime Learning Credit is a tax credit to individuals who file a tax return and owe taxes. On a tax return, a tax credit is subtracted directly from total tax owed. In contrast, a deduction (i.e. mortgage interest) reduces taxable income. The Lifetime Learning Credit is not refundable – it can only reduce the tax you owe to zero. A taxpayer can calculate and claim this credit on the IRS Form 8863 – Education Credits.
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Who can claim the credit? Life
An individual or family can claim the credit for a student enrolled at any enrollment level in any course of instruction at an eligible school (GRCC). The student can claim the credit if the student files his or her own tax return and claims a personal exemption. If a student is claimed as a dependent by another taxpayer, that taxpayer claims the tax credit. It does not matter who paid the tuition. The taxpayer is eligible for the maximum benefit with an Adjusted Gross Income of up to $47,000 for a single taxpayer (or $96,000 for married taxpayers in
2008). The credit amount is phased-out between $47,000 and $58,000 for single taxpayers (or $96,000 and $116,000 for married taxpayers in
2008). See the IRS website for income levels for 2008.
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How much is the credit? Life
The credit is based on the amount of tuition and qualified expenses (defined below) paid for a student who meets the criteria defined above. In computing the credit, qualified tuition and expenses must be reduced for scholarships, grants and other tuition benefits (i.e. employer-paid tuition programs). In other words, only amounts paid "out of pocket" are eligible for the credit. A family may claim a tax credit of up to $2,000 per year for the taxpayer, taxpayer’s spouse or any eligible dependents for an unlimited number of tax years. A family may claim up to 20% of $5,000 of eligible tuition and qualified expenses
paid in the calendar year 2008. The credit is family-based. One family can claim $2,000 total per year for all eligible students of that family.
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What kind of tuition-related expenses qualify for the credit? Life
The following GRCC fees would be considered eligible for the credit: class lab/course fees, admission fees, general service fees and technology fees.The following expenses would not be considered eligible for the credit: books and supplies, student activities, transportation/parking, personal/family living expenses, athletic fees, transcript fees, library fees and career testing fees.
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When is the credit available? Life
The taxpayer may claim the credit on his or her income tax return for the year ended December 31,
2008 for tuition and qualified expenses.
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Additional Information
Can a family claim the Hope Scholarship Credit and the Lifetime Learning Credit for the same individual?
No. A family may claim a Hope Scholarship Credit, Lifetime Learning Credit and an exclusion from gross income for certain distributions from qualified State tuition programs or education IRAs, but the same student cannot be used as the basis for each credit or exclusion. Also, the family cannot exceed the Lifetime Learning Credit maximum per family.
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Are there any other resources that may be useful in answering questions regarding these tax credits?
You can get good information and examples from the following Web site: