There are several federal tax credits that may reduce the after tax cost of higher education. The Hope Scholarship Credit is for students who are enrolled in one of the first two years of post-secondary education and are carrying at least a half-time course load while pursuing an undergraduate degree, certificate, or other recognized credential. The Lifetime Learning Credit is for students who take one or more classes from a college, university or other post-secondary institution to pursue either an undergraduate or graduate degree, certificate, or other recognized credential, or to acquire or improve job skills.
Certain of your 2006 educational expenses may be claimed on your or your parent's 2006 Federal Income Tax filing. The individual claiming the tax credit may be either the claimant or the dependent, but not both. In January, 2007 , your IRS Form 1098-T was sent to your permanent home address. This form contained your name, address, social security number, and will indicate if your enrollment status was greater than half time during any quarter and whether or not you were a graduate student in the calendar year 2006. This year your 1098-T form will include your tuition and fees charged by Western, and scholarships and grants received.
Taxpayers can claim one or, in some cases, two new tax credits for expenses they pay for post secondary education for themselves and their dependent children. These tax credits can directly reduce the amount of federal income tax for returns filed in 1999 or later. The Hope Scholarship Credit is available on a per-student basis and covers a broader time frame and range of educational courses. Education expenses paid for with tax-free grants, scholarships, and employer-education assistance are not eligible for either tax credit. Education expenses paid with loans are eligible for these tax credits.
The Hope Scholarship credit is available to eligible taxpayers on a per-student basis for the first two years of post secondary education. Eligible taxpayers may claim this credit for tuition and fees up to a maximum of $1,500 for each student. The credit can be applied toward 100 percent of the first $1,000 and 50 percent of the next $1,000 of qualified expenses. The Hope Scholarship credit will be indexed for inflation after 2001.
To be eligible, you must be enrolled at least half time in at least one academic period that begins during a tax year. Educational expenses for periods of enrollment paid on or after January 1, 1998 qualify for the Hope Scholarship credit. Also, nonresident aliens generally are ineligible to claim the Hope Scholarship credit. Eligible expenses for this credit are offset by scholarships, grants, and other tax-free tuition benefits.
The Lifetime Learning Credit is offered to encourage people to improve or acquire new job skills.This credit applies to tuition and fees for undergraduate, graduate, and continuing-education courses. Taxpayers can claim up to 20 percent of $5,000 of qualified expenses for tuition and related fees. The maximum benefit is $1,000 for each tax year. Part-time and full-time students are eligible for the Lifetime Learning credit.
Unlike the Hope Scholarship credit, you are not required to be enrolled at least half-time in one of the first two years of post secondary education. You may be eligible to receive a partial credit, even if you are taking only a single course at a community college. However, you must be within the income limits described below. Also, nonresident aliens generally are ineligible to claim the Lifetime Learning credit. Eligible expenses for this credit are offset by scholarships, grants, and other tax-free tuition benefits. Education expenses paid on or after July 1, 1998 are eligible for the Lifetime Learning credit.
The full amount of the Lifetime Learning credit and the Hope Scholarship credit is available to married taxpayers filing jointly with an adjusted gross income (AGI) of $101,000 or less and to single taxpayers with an AGI of $50,000 or less. Married taxpayers with a combined AGI of $102,000 or greater (and single taxpayers with an AGI of $51,000 or greater) are ineligible for these credits. Taxpayers cannot use both credits for the same student in a single year.
