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Tax
Relief Act of 1997
The
Tax Relief Act of 1997 may provide you an opportunity
for tax savings through the Hope Scholarship
Credit and Lifetime Learning Tax Credit. These
two tax credits are based on payments made for
tuition and certain related educational costs.
Hope
Scholarship Credit (effective 01/01/98):
- applies to the first two years of postsecondary
education;
- applies to students enrolled at least half
time in a degree seeking or certificate program
for at least one semester during the year
and to students who have never been convicted
of a state or federal felony offence consisting
of the possession or distribution of a controlled
substance;
- can equal 100% of the first $1,000 and 50%
of second $1,000 of qualified costs; total
credit is $1,500 per student
- qualified costs will be tuition and possibly
a portion of student fees, but the law specifically
excludes books, room and board, insurance,
activity and athletic fees and other expenses
unrelated to the student's academic course
of study;
- the qualified costs will be reduced by certain
financial aid awards including Pell, SEOG,
institutional waivers and scholarships;
- only the student or the taxpayer who claims
the student as an exemption on their tax return
can claim the credit, married taxpayers must
file jointly to be eligible for the credit;
- the proceeds of student and parent loans
credited to the student's account are considered
payments by the taxpayer;
- the amount a taxpayer may claim as a Hope
Scholarship Credit is gradually reduced for
taxpayers with modified adjusted gross income
between $40,000 and $50,000 (between $80,000
and $100,000 for married taxpayers filing
jointly);
- only terms beginning after 12/31/97 and
payments made after 12/31/97 can be counted
for the credit.
Lifetime
Learning Credit (effective 07/01/98):
- an individual paying qualified tuition and
related expenses at a postsecondary educational
institution may claim the credit, provided
the institution is an eligible educational
institution. Unlike the Hope Scholarship Credit,
students are not required to be enrolled at
least half time in one of the first two years
of postsecondary education. Nonresident aliens
generally are not eligible to claim the Lifetime
Learning Credit.
- can equal 20% of the first $5,000 of qualified
costs per taxpayer family per calendar year
through the year 2002 and thereafter, 20%
of the first $10,000 of qualified costs per
taxpayer family per calendar year;
- qualified costs will be tuition and possibly
a portion of student fees, but the law specifically
excludes books, room and board, insurance,
activity and athletic fees and other expenses
unrelated to the student's academic course
of study;
- the qualified costs will be reduced by certain
financial aid awards including Pell, SEOG,
institutional waivers and scholarships and
possibly private scholarships;
- only the student or the taxpayer who claims
the student as an exemption on his or her
tax return can claim the credit; married taxpayers
must file jointly to be eligible for the credit;
- the proceeds of student and parent loans
flowing through the student's account are
considered payments by the taxpayer;
- the amount a taxpayer may claim as a Lifetime
Learning Credit is gradually reduced for taxpayers
with modified adjusted gross income between
$40,000 and $50,000 (between $80,000 and $100,000
for married taxpayers filing jointly);
- only payments made on or after 07/01/98
can be counted for the credit.
For
More Information and Frequently Asked Questions
National
Association of Student Financial Aid Administrators
– Understanding the Hope Scholarship
U.S.
Department of Education – The HOPE Scholarship
and Lifetime Learning Credits
Internal Revenue Service (IRS)
If
you have further questions concerning either tax
credit, you may want to consult with a tax professional
to discuss your personal situation.
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