The Taxpayer Relief Act of 1997 provides taxpayers with higher education tax incentives, including two nonrefundable tax credits for payments made for qualified tuition and related expenses (not including activities fees, books, or room and board) for post-secondary education.
Hope Scholarship Credit
The Act permits a taxpayer to claim the Hope Scholarship Credit to a maximum credit of $1,500 (100% of the first $1,000 and 50% of the next $1000) of qualified payments. Some general qualifications include:
- enrolled in first or second year of undergraduate education
- admitted to a degree or certificate program
- enrolled for six credits or more during at least one academic term during the year
- applicable to tuition and course fees not paid by scholarships, institutional waivers, grants, tax-free employer tuition benefits, or other agencies
Lifetime Learning Credit
Students who do not qualify for the Hope Scholarship may be eligible for the Lifetime Learning Credit. This tax credit is targeted to adults who want to go back to school, change careers, or take a course or two to upgrade their skills and to college juniors, seniors, graduate and professional degree students. A family will receive a 20% tax credit for the first $5,000 of tuition and required fees paid each year through 2002, and for the first $10,000 thereafter. Just like the "HOPE Scholarship" tax credit, the Lifetime Learning tax credit is available for tuition and required fees less grants, scholarships, and other tax-free educational assistance
Complete details can be found in the IRS Publication 970, Tax Benefits for Higher Education. Information is also available on the Internet at http://www.irs.gov/pub/irs-pdf/p970.pdf
or at http://www.ed.gov/offices/OPE/PPI/HOPE/index.html.
University Obligation
The Act imposes a reporting obligation on all educational organizations that receive qualified tuition and related expense payments. The University of Maine System has contracted the services of National Computer Services, Inc. (NCS) to maintain and distribute information consistent with the Act and the format required by the IRS. The University of Maine System will provide every student, who attended during the year, with an IRS Form 1098-T by February 1st, reflecting the following information:
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Name, address, and Social Security Number of the student
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Name, address, contact name and telephone number, and employer ID of the College
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Indication whether the student attended more or less than half time during the year
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The same information will also be provided to the IRS by March 1st.
Additional information about your tuition and fee payments may be obtained from the University's Web DSIS site at https://beech.unet.maine.edu/dsis/pls/menu.logon_scrn (need ID # and PIN).
Whether a taxpayer may take advantage of these benefits depends on the taxpayer’s individual facts and circumstances.
The preceding summary is for informational use only and should not be relied upon for tax planning purposes. Neither NCS or the University of Maine System can provide legal or tax advice on this matter.
Again, please refer to IRS Publication 970 or consult with your own personal tax advisor.
