FAQs for Hope Scholarship Legislation and Other Tax Credits

FAQs for HOPE Scholarship Legislation and Other Tax Credits

What is the Hope Scholarship?
Who is eligible?
When does the Hope Scholarship take effect?
How long is the tax credit available?
What items are included in the tax credit?
Does the tax credit affect my Pell Grant or other financial aid?
Are there any restrictions?
How do I apply?
What about part-time students?
Do I file a separate IRS form or will it be part of the standard 1040?
Where can I get more information about the Hope Scholarship tax credit?
What other new educational tax benefits are available?

What is the Hope Scholarship?

The Hope Scholarship is technically not a scholarship, but a tax credit available to eligible students during their first two years of postsecondary education. The tax credit covers 100 percent of the first $1,200 of tuition and fees and 50 percent of the second $1,200 during the qualified period.

Who is eligible?

To be eligible, a student must be enrolled at least half time in a degree or certificate program.

When does the Hope Scholarship take effect?

The Hope Scholarship Credit applies for expenses paid after Dec. 31, 2008 and for education provided in academic periods beginning after that date.

How long is the tax credit available?

The tax credit is available for two tax years for students who have not completed their first two years of postsecondary education.

What items are included in the tax credit?

Hope applies only to tuition and fees - not books or other living expenses.

Does the tax credit affect my Pell Grant or other financial aid?

The amount of tuition and fees covered by the Hope Scholarship 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. For 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 Scholarship Credit. 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.

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 $58,000 are ineligible, as are joint tax filers whose MAGI exceeds $116,000. Taxpayers filing married and separate are not eligible for the Hope Scholarship Credit.

How do I apply?

Eligible individuals can claim the tax credit when they file their federal tax returns.

What about part-time students?

Students attending less than half time are not eligible for the Hope Scholarship credit.  However, they may be eligible for the Lifetime Learning Credit or tuition and fee reduction as described below.

Do I file a separate IRS form or will it be part of the standard 1040?

Students filing for the Hope Scholarship Credit need to complete tax form 8863.

Where can I get more information about the Hope Scholarship tax credit?

You may find information from the IRS Publication 970 or contact your tax advisor. 

What other new educational tax benefits are available?

(New)! American Opportunity Credit
Students who qualify as half time students may be eligible to a maximum education credit of $2,500. This credit takes into account tuition, fees, textbooks, supplies and related equipment costs. The credit is available to students for tax years 2009 and 2010 and allows taxpayers to receive a maximum $1,000 credit in excess of taxes paid. This tax credit is available for 4 years of postsecondary education. Please review the IRS comparison chart  to determine which credit applies to you.
Lifetime Learning Credit
Adults returning to college and students attending less than half time are eligible for a new Lifetime Learning 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 Scholarship 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 and 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.

 

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