How is the amount of the Hope or Lifetime Learning Credit determined?

The amount of the credit is determined by the amount you pay for qualified tuition and related expenses paid for each eligible student and the amount of your modified adjusted gross income (AGI).

What expenses qualify for the education credits?

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?

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.

Can I claim an education credit if I am married but file separately?

No. Neither the Hope Credit nor the Lifetime Learning Credit can be claimed if the individual is married but filed a separate return.

If I pay college tuition and fees with a scholarship, can I claim an education credit on Form 8863 for those payments?

No. You cannot claim a credit for the amount of higher education expenses paid for by tax-free scholarships.

If the amount of qualified tuition and fees I pay is greater than the amount of my scholarship, should I fill out Form 8863? If I cannot use Form 8863 because I received a scholarship, what can I do?

You must reduce the qualified expenses by the amount of any tax-free educational assistance. Do not reduce the qualified expenses by amounts paid with the student's earnings, loans, gifts, inheritances, and personal savings. Also, do not reduce the qualified expenses by any scholarship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualified tuition and related expenses.

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.