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| Education Credits |
There are three tax breaks began with a goal of reducing the cost burden of education for you and your family. The tax breaks are the Tuition and Fees Deduction, HOPE Credits and Lifetime Learning Credits.
Most Taxpayers with AGI of up to $65,000 - $80,000 ($130,000 - $160,000 on a joint return) may deduct up to $2,000 for tuition and fees paid to attend an accredited college, university, or vocational school. Persons who may be claimed as dependents, and married persons filing separately, may not take this deduction.
A taxpayer may not claim both this deduction and a tax credit for educational expenses for the same student in one year. Qualifying expenses must be reduced by any nontaxable earnings from a Coverdell Educational Account, a qualified tuition program, or an education savings bond.
The HOPE Credit can pay up to $1,650 of the cost of the first two years of a college education. The Lifetime Learning Credit (LL) can pay up to $2,000 of education costs each year. Each student may only use one or the other in a particular year.
HOPE pays the first $1,100 you spend, and 50% of the next $1,100. There is a maximum credit of $1,650 per qualifying student in the household. Lifetime Learning pays 20% of the first $10,000 each year to a maximum of $2,000. The LL credit is up to $2,000 for the entire family.
Type of Education. The HOPE credit covers the first two years of a post-secondary program leading to a degree or certificate. A student may use HOPE in only two different tax years, and can’t use LL in the same year. LL can be used for any post-secondary classes (even to acquire or improve job skills). It may be used as often as you qualify. Whenever possible, use the two-year HOPE credit first, then switch to the LL credit.
Eligible Expenses. Tuition and fees only. Books, supplies, travel, room & board, and other expenses do not qualify.
Who is Eligible? You, your spouse, or any child claimed as your dependent. If the child is your dependent, the money is considered to be paid by you even if it is paid by the child.
Phase Out. The credits phase out over for incomes between $94,000 and $114,000 for joint filers and $47,000 and $57,000 for single and head of household filers.
Qualifying Education. Under HOPE, a student must be enrolled at least half-time. The LL credit has no half-time rule -- even a single class qualifies. The starting date for HOPE is 1/1/98, but for LL it’s 7/1/98.
