The amount of the
credit is determined by the amount you pay for "qualified tuition and
related expenses" for each student and the amount of your modified
adjusted gross income (modified AGI).
Expenses that qualify are tuition and fees required for enrollment or
attendance at an accredited college, university, vocational school, or
other post–secondary educational institution that is eligible to
participate in a student aid program administered by the Department of
Education.
Qualified expenses do not include room and board, insurance,
transportation, or other similar personal, living, or family expenses.
Qualified expenses may include fees for books, supplies, and equipment
only if the fees must be paid to the school for the student's enrollment
or attendance. In addition, qualified expenses may include student
activity fees if the fee must be paid to the school for the student's
enrollment or attendance.
You can claim a Hope Credit only for an "eligible student." An "eligible
student" is a student who:
As of the beginning of the year, has not completed the first two years
of post–secondary education (that is, generally is a freshman or
sophomore in college).
Is enrolled in a program that leads to a degree, certificate, or other
recognized educational credential, for at least one academic period
beginning during the year.
Is taking at least one–half of the normal full–time workload for the
student's course of study for at least one academic period beginning
during the calendar year, and
Is free of any federal or state felony conviction for possessing or
distributing a controlled substance as of the end of the year.
You can claim a Hope Credit for only two tax years for each eligible
student. An eligible student can be you, your spouse, or your dependent
for whom you claim an exemption. The maximum Hope Credit is $1,500 for
each eligible student (100% of the first $1,000 of qualified tuition and
related expenses, plus 50% of the next $1,000 of such expenses).
The Hope Credit is gradually reduced if your modified adjusted gross
income is between $42,000 and $52,000 ($85,000 and $105,000 in the case
of a joint return). The credit cannot be claimed if your modified AGI is
$52,000 or more ($105,000 or more in the case of a joint return). You
cannot claim the credit if you are married filing a separate return.
You are allowed a Lifetime Learning Credit of 20% of the first $10,000
you paid for qualified tuition and related expenses for yourself, your
spouse, or your dependent for whom you claim an exemption. The maximum
amount of credit you can claim for 2004 is $2,000 (20% of $10,000) for
all students in the family.
The Lifetime Learning Credit is not based on the student's workload. It
is allowed for one or more courses that the student takes at an eligible
educational institution. The credit is not limited to students in the
first two years of post–secondary education. Expenses for graduate–level
degree work are eligible. However, to be eligible for the credit, the
student must be taking course work in order to acquire or improve job
skills. There is no limit on the number of tax years for which the
Lifetime Learning credit can be claimed for each student. The amount you
can claim as a credit does not vary (i.e., increase) based on the number
of students for whom you pay qualified expenses. However, that amount
may be reduced based on your modified AGI. The credit is gradually
reduced if your modified AGI is between $42,000 and $52,000 ($85,000 and
$105,000 in the case of a joint return). You cannot claim the credit if
you are married filing a separate return.
For additional information on education credits, refer to
Publication
970, Tax Benefits for Education.
Related Articles:
College Expense Deduction
Tuition & Fees Deduction
Education Tax Credits - The Basics
Explained
Common Tax Blunders
