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fast facts


You cannot apply the same expenses to both the Lifetime Learning Credit and the Hope Scholarship

Lifetime Learning Credit

•Taxpayers get a 20% credit on their tax return of up to $10,000 for qualified education expenses actually paid, which comes to a maximum of $2,000 per tax return.

•There is no limit to the number of years the credit can be claimed.

•Cannot claim if modified adjusted gross income (AGI) in 2006 is more than $55,000(single) or $110,000(married filing jointly).

Hope Scholarship Credit

•Taxpayers can deduct 100% of the first $1,000 of qualified education expenses plus 50% of the amount paid over $1,000.

•There is a maximum credit per student of $1,500 per year.

•Can only use credit for two years.

•Cannot claim if modified adjusted gross income(AGI) in 2006 is more than $55,000 (single) or $110,000 (married filing jointly).

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tax credits

In addition to college savings plans that 401kid recommends, there are three tax benefits available from the IRS, depending on your income level. 

The Lifetime Learning Tax Credit is available for students who take one or more college classes toward the pursuit of a degree, be it undergraduate, graduate, certificate, or other recognized credential, or gain job skills. 

The Hope Scholarship Tax Credit can be taken by students enrolled in either of the first two years of a post-secondary education degree program.  As these two credits have income limits restrictions, the Higher Education Tuition and Fees Deduction is for taxpayers whose modified Adjusted Gross Income(AGI) is too high to qualify for either of the Hope and Lifetime Learning credits. 
If you are interested in projecting how much your family may qualify for, 401kid’s ESP Wizard software estimates your family’s tax credit awards during school years for all college bound children.

Tuition and Fees Deduction
Taxpayers may deduct up to $4,000 of tuition and related education expenses if modified adjusted gross income in 2005 is less than $65,000 (single) or $130,000 (married filing jointly). Incomes exceeding $80,000 (single) or $160,000 (married filing jointly) are not eligible for deduction. Note that you cannot use the deduction if claiming Lifetime Learning or Hope Credit in the same year unless they are for different students.

 

Top FAQs on Education Tax Credits

Q: Who can claim these tax benefits?
A: An eligible taxpayer may claim them. An eligible taxpayer may be the student or, if the student is a dependent for federal income tax purposes, the person(i.e. parent) claiming the student as a dependent. A student who is a dependent cannot claim the tax credits or deduction on his or her own tax return.

Q: What educational expenses are considered as qualified?
A: Qualified educational expenses are tuition and fees for enrollment to an eligible institution paid between and including January 1 and December 31 of the same tax year. Do not include books, room and board, student activities, athletics(unless the course is part of the degree program), insurance, equipment, transportation, or other similar personal expenses.

Q: What is an eligible educational institution?
A: It general includes any accredited public, nonprofit, or proprietary post-secondary institution of higher learning.