2003 Tax Help Archives  

Keyword: Education Tax Credits

This is archived information that pertains only to the 2003 Tax Year. If you
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3.2 Itemized Deductions/Standard Deductions: Education & Work-Related Expenses


I have a child attending a private Catholic grade school. Is any or all of the tuition I pay deductible or a tax credit?

Other than a medical deduction for tuition in the case of a special school for physical or mental disability, tuition for primary or secondary education is neither deductible as an educational expense nor as a charitable contribution, and there are no tax credits for the tuition. You cannot take a charitable deduction for tuition, or for amounts you pay instead of tuition, even if you pay them for children to attend parochial schools or qualifying nonprofit day-care centers. You also cannot deduct any fixed amount you may be required to pay in addition to the tuition fee to enroll in a private school, even if it is designated as a "donation." For more information, refer to Publication 526 , Charitable Contributions.

Starting in 2002, you can use distribution from a Coverdell Education Savings Account (formerly, Education IRA) for primary school tuition if other requirements are met. For more information, refer to Publication 970, Tax Benefits for Higher Education; and Tax Topic 310 Coverdell Education Savings Accounts.

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7.4 Child Care Credit/Other Credits: Hope & Life Time Learning Educational Credits


What are the education credits?

There are two credits available, the Hope Scholarship Credit and the Lifetime Learning Credit.

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How does the Lifetime Learning Credit different from the Hope Credit?

Unlike the Hope Credit:

  • The Lifetime Learning Credit is not based on the student's workload. It is allowed for one or more courses.
  • The credit is not limited to students in the first 2 years of postsecondary education.
  • Expenses for graduate level degree work are eligible.
  • There is no maximum period for which the credit can be claimed for each eligible student.
  • The amount you can claim as a credit does not vary (increase) based on the number of eligible students for whom you pay qualified expenses.
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    How many education credits can I claim?

    You can claim only one of the credits for each eligible student per tax year.

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    I finished my college sophomore year in June and began my junior year in September. Can I take both the Hope and Lifetime Learning Credit in that year?

    No, you cannot take both credits in one year for the same student. However, eligibility for the Hope Credit depends on your status at the beginning of the calendar year. If you are classified as a second-semester sophomore during the spring semester and as a first-semester junior during the fall semester of that same year, the qualified expenses you pay for the fall semester may be taken into account for the Hope Credit because you had not completed the first 2 years of your secondary education when the year began.

    References:

    • Publication 970, Tax Benefits for Higher Education
    • Tax Topic 605, Education credits
    • Ref (p. 35 of 8/28/01 S 25A draft final regs (ex 3); 25A (b) (2) (c) )

    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).

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    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 postsecondary 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.

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    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 postsecondary 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) postsecondary institutions.

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    Many high school seniors are also enrolled in colleges for dual academic credits. Are the fees paid to the college eligible for one of the education tax credits?

    Expenses paid for college courses taken while attending high school may qualify for the Hope Scholarship Credit or for the Lifetime Learning Credit if the student otherwise meets the qualifications for claiming either of the credits.

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    How do I know if my school is eligible to participate in the education credits?

    The educational institution should be able to tell you if it is an eligible educational institution.

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    Do I have to be enrolled in college to get the Hope education credit?

    Yes. One qualification to claim the Hope credit is that the student be enrolled in an eligible educational institution (in a program) at least half time that leads to a degree certificate or other recognized educational credential for no less than one academic period beginning in the taxable year.

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    If I put money aside in a college savings plan for my two children, is that money eligible for either the Hope or Lifetime Learning Credit?

    No, an education credit is claimed in the year in which the expenses are paid, not in the year in which money is set aside in a college savings plan. You may want to consider setting up an Educational IRA. For more information, refer to Publication 970, Tax Benefits for Higher Education.

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    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.

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    How do I claim the education credits?

    The education credits are claimed on Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), which is attached to your Form 1040 or Form 1040A.

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    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.

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    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.

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    How can I get a Form 8863?

    You can download this form and the instructions from the Forms & Pubs section of our web site. You may also call 1-800-829-3676.

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    Why did I get Form 1098-T?

    The information on Form 1098-T may help you determine whether you can claim an education tax credit.

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    Who issues the Form 1098-T?

    An eligible educational institution that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st.

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    What information is on Form 1098-T?

    The following information should be included on the form.

  • The name, address, and taxpayer identification number of the educational institution.
  • The name, address, and taxpayer identification number of the student.
  • Whether the student was enrolled for at least half of the full-time academic workload for at least one academic period.
  • Whether the student was enrolled exclusively in a graduate-level program
  • Amount of qualified tuition and fees either paid or billed by the institution (depending on institution method of reporting).
  • Scholarship and fellowship grants for the year and adjustments to the scholarship and fellowship grants for prior years.
  • Adjustment to tuition and fees for prior years.
  • Whether any payments made or reported in 2003 pertain to an academic period beginning January through March 2004.
  • Total amount of reimbursements or refunds of qualified tuition and related expenses made to student during 2003 (applicable only if issuer of 1098-T is insurer).
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    I am currently going to school and I received a Form 1098-T. What is this form? How can I claim an education tax credit?

    An eligible educational institution (such as a college or university) that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st. You may be able to claim a credit for these expenses by completing Form 8863 (PDF), Education Credits, and attaching it to your Form 1040.

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    Do I need to receive a Form 1098-T, Tuition Payments Statement, from my children's colleges before I can file for the Hope Scholarship Credit and the Lifetime Learning Tax Credit?

    No, there is no requirement that you receive this form before you can claim these credits.

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    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 quality 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.

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    If education expenses were paid by a school loan that the student has not began paying back, do the expenses still qualify for the Hope or Lifetime Learning Credits?

    The rule for a school loan is the same as the rule for a government subsidized loan. Even though the loan proceeds are not income to you, expenses paid from the loan proceeds may qualify for the Hope or Lifetime Learning Credit if the loan must be repaid. The education credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid.

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    I filed my tax return via TeleFile and then I received a form from my school stating that I was eligible for the Hope Scholarship and Lifetime Learning Credits. What do I do now?

    To claim the credit, you will need to file Form 1040X (PDF), Amended U.S. Individual Income Tax Return, and attach Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits).

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    Can I use a 1040EZ if I am going to claim education credits?

    No, you must use either Form 1040A or Form 1040 along with Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), to claim the credit.

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    If I want to take an education credit for my child, do I also have to claim my child as a dependent?

    Yes, you must claim your child as a dependent to take either of the education credits. If you claim an exemption for your child on your tax return, only you can claim the credit.

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    A divorced father pays college tuition directly to the college for his child who is claimed as a dependent on his ex-wife's return. Is the divorced father eligible for either of the educational credits - Hope or Lifetime Learning?

    No. The divorced father cannot claim an educational credit because he does not claim the child as a dependent. The ex-wife, however, can claim an educational credit because she is claiming the child as a dependent and, under a special rule, is treated as having paid the child's tuition. The child cannot claim the credit because he is being claimed as a dependent on his mother's return.

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