Feature Articles:
Taxes
Education Credits Can Help at Tax Time
Reviewed and adapted with special permission from the IRS by: Brenda Procter, M.S., and Debby Whiston, M.S., Consumer and Family Economics, College of Human Environmental Sciences, University of Missouri Extension
Are you footing the costs of higher education for
yourself or a dependent you claim for an exemption on
your tax return? The IRS says that education tax credits
can help offset those costs. The Hope Credit and the
Lifetime Learning Credit are education credits you may
be able to subtract in full from your federal income
tax, not just deduct from your taxable income.
The Hope Credit applies only for the first two years
of post-secondary education, such as college or
vocational school, and it can be worth up to $1,500 per
eligible student, per year. It does not apply to
graduate and professional-level programs. You’re allowed
100 percent of the first $1,000 of qualified tuition and
related fees paid during the tax year, plus 50 percent
of the next $1,000. Each student must be enrolled at
least half-time for at least one academic period
beginning during the year.
The Lifetime Learning Credit applies to
undergraduate, graduate and professional degree courses,
including instruction to acquire or improve job skills.
If you qualify, your credit equals 20 percent of the
first $10,000 of post-secondary tuition and fees you pay
during the year for all eligible students, for a maximum
credit of $2,000 per tax return.
You cannot claim both the Hope and Lifetime Learning
Credits for the same student in the same year.
To qualify for either credit, you must pay
post-secondary tuition and fees for yourself, your
spouse or your dependent. The credit may be claimed by
the parent or the student, but not by both. If the
student was claimed as a dependent, the student cannot
claim the credit.
These credits are phased out for Modified Adjusted
Gross Income over $42,000 ($85,000 for married filing
jointly) and eliminated completely for Modified AGI of
$52,000 or more ($105,000 for married filing jointly).
If the taxpayer is married, the credit may be claimed
only on a joint return.
The Hope Credit is not allowed for a student with a
felony drug offense conviction.
Use Form 8863 to claim either the Hope or Lifetime
Learning Credit.
For more information, see Publication 970, Tax
Benefits for Education. Download it or order it by
calling the IRS, toll free, at 1-800-TAX-FORM
(1-800-829-3676).
Links:
- Form 8863, Education Credits (PDF 82K)
- Publication 970, Tax Benefits for Higher Education (PDF 368K)
- Tax Topic 605
Source: IRS Tax Tip 2005-49
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Last update: Wednesday, March 12, 2008
