Education Tax Credits Available to Federal Tax Filers

Both the Hope and Lifetime Learning Tax Credits-which directly reduce the amount of federal income tax owed-are targeted to help working and middle income families afford college. The following are guidelines on what the tax credits cover, who qualifies, and IRS sources to contact for information.

A Hope Tax Credit of up to $1,650 can be claimed for each of the first two years of post-secondary education college or vocational school for each eligible student in a family. The student must be enrolled at least half-time at an eligible educational institution and not have completed his or her first two years of study. The credit is 100 percent of the first $1,100 of payments for qualified tuition and fees and 50 percent of the second $1,100.The goal of Hope is to make it possible for all Americans to afford the cost of the first two years of a college education. In most states, the Hope credit will cover the tuition and fees of a community college education. There is no limit on the number of eligible students who can claim a Hope credit in a household in any given year.

The Lifetime Learning Tax Credit picks up where Hope leaves off and is available for post-secondary education to vocational, college, graduate and professional students; adults who want to upgrade their job skills or acquire new ones or pursue another course of study; and even to students taking a single course as long as it is job related. Filers can claim a Lifetime Learning Credit up to $2,000. A taxpayer can claim only one Lifetime Learning Credit per tax return year for the aggregate amount of the qualified tuition and fees of those students in the family for whom no Hope credit is claimed. There is no limit, however, on the number of years a taxpayer may claim the Lifetime Learning Tax Credit.

Taxpayers cannot claim both credits for the same student in one tax year, even if the student is a sophomore at the beginning of the tax year and a junior in the second half of the tax year. Families will be able to claim the Lifetime Learning Tax Credit for some members of their family and the Hope Tax Credit for others who qualify in the same tax year. Qualified expenses covered by the tax credits are tuition and required fees, less any grants and scholarships that are received tax free. Room, board, books, and supplies are not covered.

To take advantage of the Hope and Lifetime Learning Tax Credits, taxpayers must complete and submit IRS form 8863 with their federal tax return. For more information, call the IRS Help Line at 1-800-829-1040, read IRS publication 970 or visit the Treasury Department’s Website at