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Tax Relief Act of 1997
HOPE Scholarship Tax Credit
Lifetime Learning Tax Credit
Two tax credits adopted as part of the Tax Relief Act of 1997 may
provide you an opportunity for tax savings through either the Hope
Scholarship Credit or the Lifetime Learning Tax Credit. These two
tax credits are based on payments made for tuition and certain related
educational costs. While the US Treasury Department has not yet issued
regulations covering these tax credits, The Ohio State University
wants to communicate the information currently available. The Hope
Scholarship Credit was effective beginning January 1, 1998; the Lifetime
Learning Tax Credit was effective beginning July 1, 1998.
At this time, we understand
| Hope Scholarship Credit: |
The Lifetime Learning Tax Credit: |
- is calculated on a per student basis;
- applies to the first 2 years of postsecondary education;
- can be claimed only for two tax returns for each eligible student;
- applies to students enrolled at least half time (6 quarter hours
at Ohio State) for at least one semester during the calendar year;
- equals 100% of the first $1,000 and 50% of second $1,000 of qualified costs
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- is calculated on a per family basis;
- applies to postsecondary and graduate education;
- can be claimed for an unlimited number of years;
- applies to students enrolled for any number of hours;
- equals 20% of the first $5,000 of qualified costs through the year
2002 and 20% of first $10,000 of qualified costs after 2002
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We understand of both:
- qualified costs include instructional, general and non-resident fees;
- the law specifically excludes books, residence hall fees, insurance, activity
and athletic fees and other fees;
- certain financial awards, particularly those that do not need to be repaid, will
reduce qualified expenses: including OIG and Pell grants; other tax-free scholarships and grants;
tax-free distributions from an Education IRA; and tax-free or employer-provided educational
expense reimbursement (e.g. fee authorizations) and other third party contributions;
- only the student or the taxpayer who claims the student as an exemption on their tax
return can claim the credit;
- married taxpayers must file jointly to be eligible for the credit;
- the proceeds of student and parent loans flowing through the student's account
are considered payments by the taxpayer;
- the credit is proportionately reduced for taxpayers above certain adjusted
gross income (AGI) levels:
- single: no tax credit if AGI is > $50,000, limited credit
if > $40,000;
- married filing jointly: no credit if AGI is > $100,000,
limited credit if > $80,000
To qualify for either tax credit, expenses must be paid during the
same tax year for which the credit is being claimed. For a full-time,
resident student at Ohio State, payment of fees for any two quarters
in one calendar year; Spring and Autumn for example, will be sufficient
to maximize tax credit eligibility for that year. For a full-time,
non resident student, only one quarter is necessary to maximize
the tax credit.
Please
consult with a tax professional to discuss your personal situation.
For more information concerning the tax credit you may want to contact the IRS
Office of Public Liaison at (202) 622-2970 or refer to the following information:
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