Tax Credits: Tax credits issued by the govenment (on person tax return) to help differ the costs of a college education.

WHAT IS A TAX CREDIT

Parents and students are offered a tax credit by the govenment to help differ the costs of a college education. Whoever applies must fall within certain requirements to qualify for a reduction of up to $1500 on their federal income tax bill. The tax credits allow you to subtract dollar-for-dollar basis from your income taxes, by deducting the tax credit amount fron your yearly income BEFORE taes are calculated. This ususally allows applicant to save even more than the tax credit amount, since this may drop them into a lower tax bracket.

There are two Tax Credit programs:

Hope Tax Credit

With the Hope tax Credit you can use the first two years of subsequent tuition and college fees as tax credits. There are certain rules that apply for this tax credit, be sure to check with your tax accountant. However, here are a few rules to start with:

• Student must be enrolled at least part time
• $1500 is the yearly max for the tax credit
• Eligibility is dependant on income:
  • Full amount of tax credit if income is below $41,000
  • Particial amount for income level between $41,000 to $51,000 (single) and $82,000 to $102,000 (joint)
• If your parents claim the Hope Tax Credit, then your parents will also have to claim you as an exemption on their tax returns
• The tax credit must be claimed on the Federal Income Tax Report of person(s) taking tax credit

Lifetime Learning Tax Credit

With the Hope tax Credit you can use the all years of subsequent tuition and college fees as tax credits. This tax credit can be used for the full four years of colleg, just one class to help with your job and anything inbetween. There are certain rules that apply for this tax credit, be sure to check with your tax accountant. However, here are a few rules to start with:

• Student must be enrolled at least part time
• $1500 is the yearly max for the tax credit
• Eligibility is dependant on income:
  • Full amount of tax credit if income is below $41,000
  • Particial amount for income level between $41,000 to $51,000 (single) and $82,000 to $102,000 (joint)
• If your parents claim the Hope Tax Credit, then your parents will also have to claim you as an exemption on their tax returns
• The tax credit must be claimed on the Federal Income Tax Report of person(s) taking tax credit

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