Are you preparing to send your child to college? Perhaps you want to return to school to further your education. Either way, you can take advantage of the available tax credits making further education more affordable.
Sending a child to school or returning to school yourself is stressful enough. Credits such as the Hope Scholarship Tax Credit can help reduce the amount of stress you incur from the financial strain of pursuing further education.
What is the Hope Scholarship Tax Credit?
The Hope Scholarship Tax Credit allows taxpayers to claim a credit on their tax return for the qualified tuition paid for themselves, their spouse or one of their dependents to attend a postsecondary school. The student must be pursuing a college degree, graduate degree or vocational training.
For 2008, the Hope credit offers an allowable credit, up to $1,800 per student, for each year of their first two years of postsecondary education. Specifically, this credit allows for a 100% credit per eligible student for the first $1,200 of qualified tuition expense, and a 50% credit for the next $1,200.
The credit is available for tuition and required fees, less any grants or scholarships. Qualified tuition does not include costs such as: room and board, books, student health fees or tuition for noncredit classes.
The Hope credit can be claimed by the student if the student is not claimed as a dependent. If the student is a dependent, the individual(s) who is claiming the student as a dependent may take the credit, if available.
What is a Credit?
Tax credits are the "main event" when it comes to saving money on your tax return. Unlike a deduction, a tax credit is subtracted directly from the tax liability of the individual(s) filing the tax return. For example, if your tax liability for 2007 was $5,000, and you have a $1,000 Hope credit, you tax liability is reduced to $4,000.
Who Qualifies?
To be eligible for The Hope Scholarship Tax Credit, you must be an individual who:
- Has not elected to claim the Hope credit during two prior years.
- Has not completed two years of any postsecondary school prior to the beginning of the current tax year.
- Is registered at least half-time at a postsecondary school and is working toward a degree or certificate.
When Can I Claim the Hope Credit?
The Hope credit includes all qualified educational expenses paid during the current year. For example, if you paid tuition in December 2007, but the semester does not begin until January 2008, you will be allowed to include this amount on your 2007 tax return.
To help track the amount you have paid during the year, schools must send a Form 1098-T to each taxpayer and the IRS by January 31st. The amount of tuition and fees you paid to their institution during the previous year is listed on Form 1098-T.
Phase Out
Like many other tax credits and deductions, the Hope credit has some restrictions based on your income. For 2008 the Hope credit is gradually reduced for single taxpayers when their Adjusted Gross Income reaches $48,000.
For taxpayers who file a Married Filing Joint return, the credit is gradually reduced when their AGI reaches $96,000.
If you would like additional information regarding this issue or any other tax related issues, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.
