Office of Comptroller - Bursar's Office

Understanding
The Hope Scholarship
and The Lifetime Learning Credit

For Students and Families

Information from:
The National Association
of Student Financial Aid
Administrators (NASFAA)

http://www.nasfaa.org/annualpubs/taxbenefitsguideintrofaa.html

HOPE SCHOLARSHIP

What Is The Hope Scholarship?
The Hope Scholarship is actually a tax credit, not a scholarship. A family must file a tax return and owe taxes to take advantage of it. A family may claim a tax credit of up to $1,500 per tax year for each eligible dependent. This can be done for up to two tax years. A family may claim up to 100% of the first $1,000 of eligible expenses and 50% of the next $1,000 for a maximum credit of $1,500. The Hope Credit is available only until the first two years of postsecondary education are complete. The actual amount of the credit depends on the family’s income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. The total maximum credit also is based on the number of eligible dependents, rather than a maximum dollar amount for the family, like the Lifetime Learning tax credit.
Who Qualifies?
The taxpayer must claim the eligible student as a dependent, unless the credit is for the taxpayer or the taxpayer’s spouse. See your tax professional regarding phase outs due to income.
The Student: An eligible student must be enrolled at least half time in an eligible program leading to a degree or certificate at an eligible school during the calendar year and must not have completed the first two years of such under- graduate study. In addition, the student may not have been convicted of a Federal or State felony drug offense before the end of the tax year in which the academic period occurs.
How Do You Get This Credit?
To qualify for the credit, the taxpayer must report the amount of tuition and fees paid as well as the amount of certain scholarships, grants and untaxed income used to pay the tuition and fees.
Current law specifies that schools can supply either payments received, or amounts billed. JSU provides amounts billed and certain scholarships and grants on form 1098-T to individual taxpayers and to the IRS.
The Student: An eligible student must be enrolled at least half time in an eligible program leading to a degree or certificate at an eligible school during the calendar year and must not have completed the first two years of such under- graduate study. In addition, the student may not have been convicted of a Federal or State felony drug offense before the end of the tax year in which the academic period occurs.
How Do You Get This Credit?
To qualify for the credit, the taxpayer must report the amount of tuition and fees paid as well as the amount of certain scholarships, grants and untaxed income used to pay the tuition and fees.
Current law specifies that schools can supply either payments received, or amounts billed. JSU provides amounts billed and certain scholarships and grants on form 1098-T to individual taxpayers and to the IRS.

LIFETIME LEARNING TAX CREDIT

What Is The Lifetime Learning Tax Credit?
The Lifetime Learning credit is a tax credit available to individuals who file a tax return and owe taxes. A Family may claim a tax credit of up to $2,000 per tax year (as of January 1, 2004) for the taxpayer, taxpayer’s spouse, or any eligible dependents for an unlimited number of tax years. A family may claim up to 20% of $10,000 in eligible expenses per year beginning in the tax year 2003. This credit is family-based (e.g., $2,000 per tax return) rather than dependent-based like the Hope credit.
Who Qualifies?
The Taxpayer: The taxpayer must claim the eligible student as a dependent unless the credit is for the taxpayer or the taxpayer’s spouse. See your tax professional regarding phase outs due to income.
The Student: An eligible student may be enrolled in an eligible program leading to an undergraduate or graduate degree at an eligible school during the calendar year or may be enrolled at any enrollment level in any course of instruction at an eligible school to acquire/improve the student’s job skills during the calendar year. The student may claim the credit if the student is not claimed as a dependent by another taxpayer.
How Do You Get The Credit?
To qualify for the credit, the taxpayer must report the amount of tuition and fees paid, as well as the amount of certain scholarships, grants, and untaxed income used to pay the tuition and fees.
Can a Family Claim Multiple Benefits?
A family may claim a Lifetime Learning credit, a Hope credit and an exclusion from gross income for certain distributions from qualified State tuition programs or education IRAs, as long as the same student is not used as the basis for each credit or exclusion and the family does not exceed the Lifetime Learning maximum per family.
When Is The Credit Available?
Taxpayers may pay educational expenses in a tax year for an academic period that begins following the tax year (e.g., paying in December for an academic period beginning in the first three months of the next year).

For additional information:

IRS Publications
Publication 970 (PDF), Tax Benefits for Higher Education http://www.irs.gov/pub/irs-pdf/p970.pdf

Form 8863 and instructions (PDF), Education Credits (Hope and Lifetime Learning Credits) http://www.irs.gov/pub/irs-pdf/f8863.pdf

Tax Topic 605, Education Credits
http://www.irs.gov/taxtopics/index.html

Frequently Asked Tax Questions and Answers, Education Tax Credits http://www.irs.gov/faqs/faq-kw52.html

You may phone the IRS at 1-800-829-1040.
You will need to obtain form 8863 in order to claim the credit.

Students may access their account information on the JSU website at www.jsu.edu. Select the Student Access option.

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