College Tuition Tax Credits
Pay Now, Save Next Year
The federal government offers parents and students two tuition tax credit programs, Hope and Lifetime Learning, to help pay for higher education costs. If you meet certain conditions, you can qualify for a reduction of up to $1,500 on your federal income tax bill.
What Is a Tax Credit?
Hope and Lifetime are tax credits which allow you to subtract, on a dollar-for-dollar basis, the amount of the credit from your total federal income tax bill. Income tax deductions are subtracted from your income before your taxes are calculated. As a result, tax credits usually allow for greater total savings than tax deductions.
The Hope Tax Credit
This tax credit applies to tuition and fee expenses for the first two years of post-secondary education.
To claim Hope credit, the student must be enrolled at least half-time for at least one academic period.
The maximum yearly credit per eligible student is $1,500.
There is no limit on how many family members can receive the credit.
The amount of the credit begins to phase out if your modified adjusted gross income (MAGI) is between $41,000 and $51,000 for a single return and between $82,000 and $102,000 for a joint return.
For your parents to claim a Hope credit for your expenses, your parents must also claim an exemption for you. If your parents do not claim you as an exemption, you yourself can claim the Hope credit.
You claim the Hope credit by completing Parts I and III of IRS Form 8863, entering the education credit figure on your 1040 or 1040A, and submitting it with your tax return.
The Lifetime Learning Tax Credit
This credit is available for all years of postsecondary education and for courses (even a single course) to acquire or improve job skills.
Like the Hope credit, the Lifetime Learning credit can only be used for tuition and fees. The credit can be claimed for 20 percent of the amount you pay (see maximum limits below).
The maximum yearly credit is $1,000. The amount of qualified tuition and related expenses you may take into account in figuring your Lifetime Learning credit increases from $5,000 to $10,000, raising the maximum credit to $2,000. Note: This is the limit per return, not per student.
The family income limits to qualify for the Lifetime Learning credit are the same as for the Hope program. The amount of the credit begins to phase out if your MAGI is between $41,000 and $51,000 for a single return and between $82,000 and $102,000 for a joint return.
You claim the Lifetime Learning credit by completing Parts II and III of IRS Form 8863, entering the education credit figure on your 1040 or 1040A, and submitting it with your tax return.
Don't Forget ...
Consult IRS Publication 970 for specific rules on eligibility and claiming these tax credits. Here are some general rules to keep in mind.
You may not claim both a Hope and a Lifetime credit for the same student in the same year.
Family income limits: Both credits are only available to taxpayers whose MAGI is under $51,000 if filing a single return, or $102,000 if filing a joint return.
More Information on Tuition Tax Credits
Additional rules and restrictions apply. For the most up-to-date information visit the Department of Education and the IRS websites. You might also want to consult your tax preparer or financial advisor.