Tax Tips
If you are paying for your or your dependent's college education, there are two tax credits available for you. They are the Hope and the Lifetime Learning credits. (For information: www.irs.gov)
What is a tax credit?
A tax credit is better than a deduction. A credit is subtracted directly from your federal income tax on a dollar-for-dollar basis. This saves you more money than a deduction, which you subtract from your income before you calculate your tax and which yields much less than dollar-for-dollar savings.
Who gets to claim the credit?
If someone claims the student as a dependent for tax purposes, that person, not the student, may receive the tax credit, even if the student files a tax return. Otherwise, only the student may receive the credit.
What college costs qualify?
Qualified expenses include tuition and required fees, minus any grants and scholarships that are received tax-free.
Expenses for books and supplies are not included unless they are paid to the institution as a condition of enrollment.
The costs of room and board, insurance, transportation, and medical fees (including health fees) are not qualified expenses, even if required for enrollment.
What is the difference between the credits?
- Hope Scholarship - The Hope credit can be claimed for each of the first two years of college or vocational school for classes that lead to a degree or recognized certificate. The student must be enrolled at least half-time to qualify for the Hope credit.
- Lifetime Learning Credit - The Lifetime Learning credit is available for any postsecondary education, including graduate and professional school, and unlike the Hope credit, there is no minimum enrollment.
How do I get more information?
- Call: 1-800-829-1040 (IRS Help Line)
- Read: IRS publication 970: "Tax Benefits for Higher Education"
- Visit IRS website: www.irs.gov
