The Taxpayer Relief Act of 1997 and How It Affects You
The Hope Scholarship
Although it is called a scholarship, it is really a tax credit. Unlike a tax deduction, which is used to adjust a family's taxable income, a tax credit is deducted from the actual amount of tax owed.
Who Can Get One? Qualified students can get one for the first two years of postsecondary education.
How Much Can I Get? Up to $1,500 per tax year.
How Do I Qualify? You don't have to apply for the Hope Scholarship, unlike other scholarships. But, the independent student or parents of the dependent student have to file a tax return and must have tax liability to get it.
You (or your parents) get the maximum amount if you earn up to $40,000 if you're single, $80,000 if you're married. The tax credit is then "phased out" between single filers' $40,000 and $50,000 Adjusted Gross Incomes, meaning it is diminished until it is zeroed out at $50,000 (between $80,000 and $100,000 for joint filers).
You have to be enrolled at least half-time in a degree or certificate program in an eligible school (check with your school to make sure it is eligible -- UNCW is), and you can't have been convicted of a Federal or State felony drug offense during the tax year.
When Does It Start? It becomes available with college tuition and fee payments made after January 1, 1998.
Lifetime Learning Tax Credit
This is also a tax credit available to students who have more than two years of postsecondary education.
Who Can Get One? Qualified students -- and the qualifications are almost identical to those for the Hope Scholarship, except that students will have had at least two years of postsecondary education.
How Much Can I Get? That depends. The maximum Lifetime Learning Tax Credit is $1000 a year per tax filer. So, even if there is more than one student in a family who qualifies for this tax credit, the family can only claim $1000 of Lifetime Learning Credit.
However, the Lifetime Learning Credit and the Hope Scholarship can both be claimed by the family for a tax year, as long as the different tax credits apply to different students.
When Does It Start? With expenses paid July 1, 1998 and after.
The Rest of the Story
We suggest you check out three IRS websites. The first provides a brief summary of the of the Hope Scholarship tax credit, the Lifetime Learning Credit, and other aspects of the new tax law. The second provides a detailed description of the credits with a lengthy question and answer format. The third allows access and downloading of, among others, IRS Publication 970 --Tax Benefits for Higher Education.
We also strongly recommend you contact your accounting/tax professional right away to find out if you qualify and get the latest updates on this law.