Hope & Life Time Learning Educational Credits
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What are the education credits?
There are two credits available, the Hope Scholarship Credit and the Lifetime Learning Credit.
References: How does the Lifetime Learning Credit different from the Hope Credit?
Unlike the Hope Credit: - The Lifetime Learning Credit is not based on the student's workload. It is allowed for one or more courses.
- The credit is not limited to students in the first 2 years of postsecondary education.
- Expenses for graduate level degree work are eligible.
- There is no maximum period for which the credit can be claimed for each eligible student.
- The amount you can claim as a credit does not vary (increase) based on the number of eligible students for whom you pay qualified expenses.
References: How many education credits can I claim?
You can claim only one of the credits for each eligible student per tax year.
References: I finished my college sophomore year in June and began my junior year in September. Can I take both the Hope and Lifetime Learning Credit in that year?
No, you cannot take both credits in one year for the same student. However, eligibility for the Hope Credit depends on your status at the beginning of the calendar year. If you are classified as a second-semester sophomore during the spring semester and as a first-semester junior during the fall semester of that same year, the qualified expenses you pay for the fall semester may be taken into account for the Hope Credit because you had not completed the first 2 years of your secondary education when the year began.
References: - Publication 970 (PDF), Tax Benefits for Higher Education
- Tax Topic 605, Education credits
- Ref (p. 35 of 8/28/01 S 25A draft final regs (ex 3); 25A (b) (2) (c) )
How is the amount of the Hope or Lifetime Learning Credit determined?
The amount of the credit is determined by the amount you pay for qualified tuition and related expenses paid for each eligible student and the amount of your modified adjusted gross income (AGI).
References: What expenses qualify for the education credits?
Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other postsecondary educational institution eligible to participate in the student aid programs administered by the Department of Education.
Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution.
References: Are expenses to attend private high schools eligible for the education credits ?
No. Expenses paid to attend high school do not qualify for the education credits because a high school is not an eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit making) postsecondary institutions.
References: Many high school seniors are also enrolled in colleges for dual academic credits. Are the fees paid to the college eligible for one of the education tax credits?
Expenses paid for college courses taken while attending high school may qualify for the Hope Scholarship Credit or for the Lifetime Learning Credit if the student otherwise meets the qualifications for claiming either of the credits.
References: How do I know if my school is eligible to participate in the education credits?
The educational institution should be able to tell you if it is an eligible educational institution.
References: Do I have to be enrolled in college to get the Hope education credit?
Yes. One qualification to claim the Hope credit is that the student be enrolled in college for at least one academic period beginning in the taxable year.
References: If I put money aside in a college savings plan for my two children, is that money eligible for either the Hope or Lifetime Learning Credit?
No, an education credit is claimed in the year in which the expenses are paid, not in the year in which money is set aside in a college savings plan. You may want to consider setting up an Educational IRA. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education.
References: Can I claim an education credit if I am married but file separately?
No. Neither the Hope Credit nor the Lifetime Learning Credit can be claimed if the individual is married but filed a separate return.
References: How do I claim the education credits?
The education credits are claimed on Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), which is attached to your Form 1040 or Form 1040A.
References: If I pay college tuition and fees with a scholarship, can I claim an education credit on Form 8863 for those payments?
No. You cannot claim a credit for the amount of higher education expenses paid for by tax-free scholarships.
References: If the amount of qualified tuition and fees I pay is greater than the amount of my scholarship, should I fill out Form 8863? If I cannot use Form 8863 because I received a scholarship, what can I do?
You must reduce the qualified expenses by the amount of any tax-free educational assistance. Do not reduce the qualified expenses by amounts paid with the student's earnings, loans, gifts, inheritances, and personal savings. Also, do not reduce the qualified expenses by any scholarship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualified tuition and related expenses.
References: How can I get a Form 8863?
You can download this form and the instructions from the Forms & Pubs section of our web site. You may also call 1-800-829-3676.
References: Why did I get Form 1098-T?
The information on Form 1098-T may help you determine whether you can claim an education tax credit.
References: Who issues the Form 1098-T?
An eligible educational institution that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st.
References: What information is on Form 1098-T?
The following information should be included on the form. - The name, address, and taxpayer identification number of the educational institution.
- The name, address, and taxpayer identification number of the student.
- Whether the student was enrolled for at least half of the full-time academic workload for at least one academic period.
- Whether the student was enrolled exclusively in a graduate-level program
References: I am currently going to school and I received a Form 1098-T. What is this form? How can I claim an education tax credit?
An eligible educational institution (such as a college or university) that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st. You may be able to claim a credit for these expenses by completing Form 8863 (PDF), Education Credits, and attaching it to your Form 1040.
References: Do I need to receive a Form 1098-T, Tuition Payments Statement, from my children's colleges before I can file for the Hope Scholarship Credit and the Lifetime Learning Tax Credit?
No, there is no requirement that you receive this form before you can claim these credits.
References: If tuition was paid by a government subsidized loan, can I still take the Hope or Lifetime Learning Credit?
If you take out a loan to pay higher education expenses, those expenses may quality for the credit if you will be required to pay back the loan. The credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid.
References: If education expenses were paid by a school loan, that the student has not began paying back, do the expenses still qualify for the Hope or Lifetime Learning Credits?
The rule for a school loan is the same as the rule for a government subsidized loan. Even though the loan proceeds are not income to you, expenses paid from the loan proceeds may qualify for the Hope or Lifetime Learning Credit if the loan must be repaid. The education credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid.
References: I filed my tax return via TeleFile and then I received a form from my school stating that I was eligible for the Hope Scholarship and Lifetime Learning Credits. What do I do now?
To claim the credit, you will need to file Form 1040X (PDF), Amended U.S. Individual Income Tax Return, and attach Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits).
References: Can I use a 1040EZ if I am going to claim education credits?
No, you must use either Form 1040A or Form 1040 along with Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), to claim the credit.
References: If I want to take an education credit for my child, do I also have to claim my child as a dependent?
Yes, you must claim your child as a dependent to take either of the education credits. If you claim an exemption for your child on your tax return, only you can claim the credit.
References: A divorced father pays college tuition directly to the college for his child who is claimed as a dependent on his ex-wife's return. Is the divorced father eligible for either of the educational credits - Hope or Lifetime Learning?
No. The divorced father cannot claim an educational credit because he does not claim the child as a dependent. The ex-wife, however, can claim an educational credit because she is claiming the child as a dependent and, under a special rule, is treated as having paid the child's tuition. The child cannot claim the credit because he is being claimed as a dependent on his mother's return.
References: What is a Hope Credit?
It is a nonrefundable tax credit for a student's first 2 years of undergraduate education.
References: Who can claim the Hope Credit?
You can claim a Hope Credit for an eligible student who is: - Enrolled in one of the first 2 years of postsecondary education (generally freshman or sophomore years of college).
- Enrolled in a program that leads to a degree, certificate, or other recognized educational credential.
- Taking at least one-half of the normal full-time workload for the course of study for at least one academic period beginning during the calendar year.
- Free of any felony conviction for possessing or distributing a controlled substance (drugs).
An eligible student can be you, your spouse, or an eligible dependent
References: What is the amount of the Hope Credit?
The maximum credit per student is $1,500 (100 percent of the first $1,000 of qualified tuition and related expenses, plus 50 percent of the next $1,000 of such expenses).
References: I understand for the Hope Credit I must be in my first 2 years of college. Does that mean I can take the credit if I am ranked as a freshman or a sophomore even if I have been attending college for more than 2 years?
The Hope Credit may be claimed for no more than 2 taxable years and may not be claimed if at the beginning of the taxable year the student has completed the first 2 years of postsecondary education at an eligible educational institution. If the student has not claimed a Hope Credit for more than 1 year and if the educational institution at which the student is enrolled ranks the student as being less than a first-semester junior at the beginning of the year, the student may be eligible to claim the Hope Credit.
References: Is tuition paid to a foreign university eligible for the Hope Credit?
Relatively few, postsecondary institutions located outside of the United States participate in a student aid program administered by the Department of Education. Therefore, tuition paid to a foreign university usually does not qualify for either of the education credits. The educational institution should be able to tell you if it is an eligible educational institution.
References: I will be able to claim the Hope Credit. What records do I need to claim this credit?
You should keep all your canceled checks that were used to pay for the qualifying expenses and any other documentation showing the amount of tuition and fees paid.
References: I am currently attending school for a second bachelor's degree. I completed my original degree several years ago. Am I eligible for the Hope Credit because I am just entering my second year of this bachelor's degree program?
No. Since you have already completed your first 2 years of postsecondary education, the courses that you are now taking do not qualify for the Hope Credit. However, you may be eligible for the Lifetime Learning Credit.
References: I have returned to college after several years. I attend a community college and have not received an associate's degree as of yet. Can I claim the Hope Credit for tuition I paid this year?
You can only claim the Hope Credit if at the beginning of the year, you are not classified as having completed the first 2 years of postsecondary education.
For example, if you attended classes for only one or two semesters, you would still be in your first 2 years of post secondary school. Generally if you attended five or more semesters, you would not be considered in your first 2 years of post secondary school even if you have not attained your associate's degree.
If you don't qualify for the Hope Credit, you may qualify for the Lifetime Learning Credit.
References: What is a Lifetime Learning Credit?
A nonrefundable tax credit up to $1,000 per family for all undergraduate and graduate level education.
References: Who is eligible for the Lifetime Learning Credit?
An eligible student can be you, your spouse, or an eligible dependent. In any one tax year, only one person can claim a higher education credit for a student's expenses.
References: I'm a full-time graduate student and am required pay a comprehensive fee as part of my enrollment. This fee includes student center fees, health fees, bus fees, and athletic fees. Does this comprehensive fee qualify for the Lifetime Learning Credit?
If a student is required to pay a comprehensive fee to an eligible educational institution that includes charges for tuition, fees, and personal expenses, the portion of the comprehensive fee allocable to personal expenses is not eligible for the credit. The allocation must be made by the institution using a reasonable method.
References: Is the Lifetime Learning Credit used only to reduce the tax people owe or may it give me a refund even if I do not owe any tax?
Both the Hope Credit and the Lifetime Learning Credit are nonrefundable credits. This means that the credits may reduce your federal income tax liability down to zero. However, if you do not owe any tax, the credits will not result in a refund.
References: Can the Lifetime Learning Credit be used for a high school student taking classes at an approved college prior to graduation from high school?
College courses taken while attending high school may qualify for the Hope Scholarship Credit or for the Lifetime Learning Credit if the student meets the qualifications for claiming either of the credits.
References: What information on this Form 1098-T statement from my university do I use to figure my Lifetime Learning Credit?
If you claim an education credit, keep Form 1098-T with your tax records. The information on the form will not be used to figure the amount of your credit. Instead, use Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), to calculate your credit.
References: Can nonresident aliens claim the Lifetime Learning Credit for tuition paid to go to school?
If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. However, if you are married and choose to file a joint return with a U.S. citizen or resident spouse, you may be eligible for the Hope or Lifetime Learning Credit.
References: I did not attend school this year, but made loan payments on a loan I previously took out to pay my college tuition. Can I claim a lifetime credit for the money I used to repay the loan?
No, payments on your student loans do not qualify for the Lifetime Learning Credit. However, interest on student loans may be deductible for Federal income tax purposes if you meet certain conditions. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education.
References: I am a student who is claimed as a dependent on my parent's tax return. I pay my college tuition out of my own earnings. Can I take the Lifetime Learning Credit on my tax return?
No, if your parents claim you as a dependent, you cannot claim either of the education credits. However, any qualifying tuition payments that you made can be claimed by your parents as paid by themselves and may qualify them for the Hope or Lifetime Learning Credit.
References: Am I eligible to claim both my job education expenses (minus 2 percent of AGI) and the Lifetime Learning Credit on my taxes?
You can not deduct educational expenses and claim a credit for the same expenses. You must choose one or the other.
References: If my employer reimbursed my education expenses and included the reimbursement in my taxable income, is the amount still eligible for the Lifetime Learning Credit?
The amount included as taxable income is eligible for the Lifetime Learning Credit. If your tuition is paid by your employer but is not included in your taxable income, then the amount of the tuition is ineligible for the education credit. This is because double tax benefits are not allowed.
References: I am trying to understand what is a qualified expense under the Lifetime Learning Credit. The guidelines state books are included in qualified expenses only if the fee must be paid to the institution as a condition of enrollment or attendance at the institution. I am required to have books for classes that I am taking, and I purchased the books from the college bookstore. Can I add the cost of these books to my qualified expenses?
In general, an educational credit is not available for expenses incurred to pay for books. The Federal Income Tax Regulations provide an example that may be helpful: First-year students at College W are required to obtain books and other reading materials used in its mandatory first-year curriculum. The books and other reading materials are not required to be purchased from College W and may be borrowed from other students or purchased from off-campus bookstores, as well as from College W's bookstore. College W bills students for any books and materials purchased from College W's bookstore. The fee that College W charges for the first-year books and materials purchased at its bookstore is not a qualified tuition and related expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.
References:
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