Carroll Community College

HOPE Scholarship and tax breaks cut college costs

The Hope Scholarship program and other aspects of the federal Tax Relief Act of 1997 can help make your education at Carroll Community College even more accessible.

The Hope legislation allows eligible students pursuing the first two years of postsecondary education to receive a tax credit for 100 percent of the first $1,100 of tuition and fees and 50 percent of the second $1,100 on their federal income tax.  Students must be enrolled at least half-time (six credit hours) in a degree, certificate or other program leading to a recognized education credential.

FAQ for HOPE Scholarship legislation and other tax credits

1. What is the Hope Scholarship?
   The Hope Scholarship is technically not a scholarship.  It's a tax credit available to eligible students during their first two years of postsecondary education.  The tax credit covers 100 percent of the first $1,100 of tuition and fees and 50 percent of the second $1,100 during the qualified period.
2. Who is eligible?
   To be eligible, a student must be enrolled at least half time in a degree or certificate program.
3. When does it take effect?
   The Hope tax credit applies for expenses paid after Dec. 31, 2006, and for education provided in academic periods beginning after that date.
4. How long is the tax credit available?
   The tax credit is available for two tax years for students who haven't completed their first two years of postsecondary education.
5. What items are included in the tax credit?
   Hope applies only to tuition and fees - not books or other living expenses.
6. Does the tax credit affect my Pell Grant or other financial aid?
   The amount of tuition and fees covered by the Hope tax credit is reduced by other grant and scholarship aid received. This includes scholarship funds excluded from an individual’s gross income as well as federal grant aid such as Pell Grants.  Example:  If a student incurs $1,250 in tuition and fees and receives a Pell Grant greater than $1,250, he/she is not eligible for the Hope credit.  Or, if a student is responsible for $1,250 in tuition and fees and receives a Pell grant of $700, the student is eligible for a tax credit of $550.
7. Are there any restrictions?
   Yes, students convicted of a felony related to the possession or distribution of a controlled, dangerous substance, including marijuana are not eligible. In addition, individual tax filers whose modified adjusted gross income (MAGI) exceeds $57,000 are ineligible, as are joint tax filers whose MAGI exceeds $114,000. Taxpayers filing married separate are not eligible for the Hope Scholarship tax credit.
8. How do I apply?
   Eligible individuals can claim the tax credit when they file their federal tax returns.
9. What about part-time students?
   Students attending less than half time are not eligible for the Hope tax credit.  However, they may be eligible for the lifetime learning credit or tuition and fee reduction as described below.
10. Do I file a separate IRS form or will it be part of the standard 1040?
    Students filing for a Hope tax credit will need to complete tax form 8863.
11. Where can I get more information about the Hope tax credit?
    You may find information from the  IRS Publication 970  or contact your tax advisor. 
12. What other new educational tax benefits are available?
    
    Lifetime Learning Credit
    Adults returning to college and students attending less than half time are eligible for a new lifetime learning tax credit.  The credit is worth 20 percent of the first $10,000 of tuition and fees for the year 2007.  Eligibility is determined at the same income levels as the Hope Scholarship.  The Lifetime Learning Credit may not be claimed during the same year as the Hope tax credit.
    
    

    Tuition and Fee Deduction

    You may be able to deduct qualified expenses paid during the year for yourself, your spouse, or dependent. Taxpayers filing married separate are not eligible for this income adjustment.  The tuition and fee tax deduction, as much as $4,000, can be taken as an adjustment to income.  See IRS publication 970 for more details.  
    
    Exemption of Employer-Provided Assistance
    Section 127 of the IRS Code allows working adults to exclude from their taxable income up to $5,250 in employer-provided assistance annually. This benefit does not apply to graduate programs.

FOR INFORMATION ON THIS AND OTHER EDUCATIONAL TAX BENEFITS, CONTACT YOUR TAX ADVISOR.