| Can I claim Hope/Lifetime learning credit for my child’s private elementary school? | Top |
| Expenses that qualify are tuition and fees required for enrollment or attendance at an accredited college, university, vocational school, or other post-secondary educational institution that is eligible to participate in a student aid program administered by the Department of Education. Pre-School and private tuition for elementary and secondary school does not qualify. |
Qualified expenses do not include room and board, insurance, transportation, or other similar personal, living, or family expenses. Qualified expenses may include fees for books, supplies, and equipment only if the fee must be paid to the school for the student's enrollment or attendance. In addition, qualified expenses may include student activity fees if the fee must be paid to the school for the student's enrollment or attendance.
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| Can I claim both education credits for the same student? | Top |
| For each student, you can elect for any year only one of the credits. For example, if you elect to take the Hope credit for a child on your tax return, you cannot, for that same child, also claim the lifetime learning credit for the current tax year. If you are eligible to claim the Hope credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both. For 2007, if the total qualified education expenses for a student are less than $7,500, it will generally be to your benefit to claim the Hope credit. |
| What expenses qualify for the education credits? | Top |
| Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other post-secondary educational institution eligible to participate in the student aid programs administered by the Department of Education. Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution. |
| Are expenses to attend private high schools eligible for the education credits? | Top |
| No. Expenses paid to attend high school do not qualify for the education credits because a high school is not an eligible educational institution. An eligible educational institution is any college, university, vocational school, or other post-secondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit making) post-secondary institutions. |
| E-file does not begin until mid January and W-2's are required to be out by Jan 31st. |
| If I pay college tuition and fees with a scholarship, can I claim an education credit on Form 8863 for those payments? | Top |
| No. You cannot claim a credit for the amount of higher education expenses paid for by tax-free scholarships. |
| If tuition was paid by a government subsidized loan, can I still take the Hope or Lifetime Learning Credit? |
| If you take out a loan to pay higher education expenses, those expenses may qualify for the credit if you will be required to pay back the loan. The credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid. |
| Where do I put information from a 1098-T? | Top |
| If you received a 1098-T, you can take that as a tuition and fees deduction or as an education credit. |
| The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if you cannot take either the Hope or Lifetime learning credit because your income is too high. |
| Generally, you can claim the tuition and fees deduction if all three of the following requirements are met. |
- You pay qualified education expenses of higher education.
- You pay the education expenses for an eligible student.
- The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.
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| You cannot claim the tuition and fees deduction if any of the following apply: |
- Your filing status is married filing separately.
- Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.
- Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return).
- You were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens.
- You or anyone else claims a Hope or Lifetime learning credit in the current tax year with respect to expenses of the student for whom the qualified education expenses were paid.
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| My filing status is head of household. According to the separation agreement, my ex-husband claims our college daughter as his dependent for tax purposes. I, however, pay all of her education expenses. Can I take the tuition and fees deduction? | Top |
| In order to qualify for the Tuition and Fee’s deduction, the student for which you are claiming the deduction must be a dependent for whom you claim on your tax return. If you are not claiming the student as a dependent on your return, you will not be able to take the deduction for the education expenses you paid for that student. |
| I received a Pell Grant. Do I have to claim that as income? | Top |
| These need-based grants are treated as scholarships for purposes of figuring their taxability. They are tax free to the extent used for qualified education expenses during the period for which a grant is awarded. Only the taxable amount must be reported. |
| What is the limit for deducting student loan interest? | Top |
| The maximum deductible interest on a qualified student loan is $2,500 per return. If you are a taxpayer whose return status is married filing jointly, you are allowed to deduct the full $2,500 only when your Modified Adjusted Gross Income (MAGI) is $105,000 or less. If your MAGI is between $105,000 and $135,000, the amount of your student loan interest deduction is gradually reduced. |
If your filing status is single, head of household or qualifying widow(er), the full $2,500 deduction is allowed for MAGI levels equal to or below $50,000. For MAGI between $50,000 and $65,000, the deduction amount is phased out.
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| What is a Coverdell ESA? | Top |
| A Coverdell Education Savings Account (ESA) is a savings account created as an incentive to help parents and students save for education expenses. |
| The total contributions for the beneficiary (who is under age 18 or is a special needs beneficiary) of this account in any year cannot be more than $2,000, no matter how many accounts have been established. The beneficiary will not owe tax on the distributions if, for a year, the distributions from an account are not more than a beneficiary’s qualified education expenses at an eligible education institution. This benefit applies to higher education expenses as well as to elementary and secondary education expenses. |
| Generally, any individual (including the beneficiary) can contribute to a Coverdell ESA if the individual's modified adjusted gross (MAGI) income is less than $110,000 ($220,000 if the individual is filing a joint return). The $2,000 maximum contribution per beneficiary is gradually reduced if the contributor's MAGI is between $95,000 and $110,000 ($190,000 and $220,000 if the contributor is filing a joint return). |
| Usually, MAGI for the purpose of determining your maximum contribution limit is the adjusted gross income (AGI) shown on your tax return increased by the following exclusion from your income: foreign earned income of U.S. citizens or residents living abroad, housing costs of U.S. citizens or residents living abroad, and income from sources within Puerto Rico or American Samoa. Contributions to a Coverdell ESA may be made until the due date of the contributor’s return, without extensions. |
| Distributions are tax-free as long as they are used for qualified education expenses, such as tuition, books, fees, etc., at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. The Hope and Lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. Refer to Publication 970 for more details. If the distribution exceeds education expenses, a portion will be taxable to the beneficiary and will be subject to an additional 10& tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship. |
If there is a balance in the Coverdell ESA at the time the beneficiary reaches age 30, it must be distributed within 30 days. A portion representing earnings on the account will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member.
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