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7.4 Child Care Credit/Other Credits : Hope & Life Time Learning Educational Credits
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, Tax Benefits for 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 an eligible educational institution (in a program) at least half
time that leads to a degree certificate or other recognized educational credential
for no less than 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, Tax Benefits for 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
Amount of qualified tuition and fees either paid or billed by the institution
(depending on institution method of reporting).
Scholarship and fellowship grants for the year and adjustments to the
scholarship and fellowship grants for prior years.
Adjustment to tuition and fees for prior years.
Whether any payments made or reported in 2003 pertain to an academic period
beginning January through March 2004.
Total amount of reimbursements or refunds of qualified tuition and related
expenses made to student during 2003 (applicable only if issuer of 1098-T
is insurer).
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 qualify 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?
Generally, you can claim the Hope credit if all three of
the following requirements are met.
You pay qualified tuition and related expenses of
higher education.
You pay the tuition and related expenses for an eligible
student.
The eligible student is either yourself, your spouse, or a dependent
for whom you claim an exemption on your tax return.
You cannot claim the Hope credit if any of the following apply.
Your filing status is married separately.
You are listed as a dependent in the Exemptions section
on another person's tax return (such as your parents'). See Who
Can Claim a Dependent's Expenses , later.
Your modified adjusted gross income is $51,000 or more ($103,000 or more
in the case of a joint return). Modified adjusted gross income is explained
later under Does the Amount of Your Income Affect the Amount
of Your Credit.
You (or your spouse) were a nonresident alien for any part of 2002 and
the nonresident alien did not elect to be treated as a resident alien for
tax purposes. More information on nonresident alien can be found in Publication 519 , U.S. Tax Guide for Aliens.
You claim the lifetime learning credit for the same student in 2002.
In general, qualified tuition and related expenses are tuition and fees
required for enrollment or attendance at an eligible educational
instititution
Eligible education institution . An eligible educational
institution is an 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. The educational institution should be able to tell you if it
is an eligible educational institution.
To claim the Hope credit, the student for whom you pay qualified tuition
and related expenses must be an eligible student. This
is a student who meets all of the following requirements.
Did not have expenses that were used to figure a Hope credit in any 2
earlier tax years.
Had not completed the first 2 years of postsecondary education (generally,
the freshman and sophomore years of college) before 2002.
Was enrolled at least half-time in a program that leads to a degree, certificate,
or other recognized educational credential for a least one academic period
beginning in 2002.
Was free of any federal or state felony conviction for possessing or
distributing a controlled substance as of the end of 2002.
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 $2,000 per family for all undergraduate
and graduate level education. Figured by taking 20% of the first $10,000 of
qualified educational expenses paid.
References:
Who is eligible for the Lifetime Learning Credit?
Generally, you can claim the lifetime learning credit if all
three of the following requirements are met.
You pay qualified tuition and related expenses of
higher education.
You pay the tuition and related expenses for an eligible
student.
The eligible student is either yourself, your spouse, or a dependent
for who you claim an exemption on your tax return.
The lifetime learning credit is based on qualified tuition and related
expenses you pay for yourself, your spouse, or a dependent for who you can
claim an exemption on your tax return. Generally, the credit is allowed for
qualified tuition and related expenses paid in 2003 for an academic
period beginning in 2003 or in the first 3 months of 2004.
For purposes of the lifetime learning credit, an eligible student is a
student who is enrolled in one or more courses at an eligible
educational institution.
An eligible educational institution is an 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. The educational institution should
be able to tell you if it is an eligible educational institution.
You cannot claim the lifetime learning credit if any of
the following apply.
Your filing status is married filing separately.
You are listed as a dependent in the Exemptions section
on another person's tax return (such as your parent's). See Who
Can Claim a Dependent's Expenses, later.
Your modified adjusted gross income is $51,000 or more ($103,000 or more
in the case of a joint return). Modified adjusted gross income is explained
later under Does the Amount of Your Income Affect the Amount
of Your Credit.
You (or your spouse) were a nonresident alien for any part of 2003 and
the nonresident alien did not elect to be treated as a resident for tax purposes.
More information on resident aliens can be found in Publication 519, U.S.
Tax Guide for Aliens.
You claim the Hope credit for the same student in 2003.
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, Tax Benefits for 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 that 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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