Hope and Lifetime Learning Credits |
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The Hope Credit and Lifetime Learning Credit offer another way to reduce your taxes while paying for college. Available for only the first two years of college, the Hope Credit equals 100% of the first $1,100 paid for college tuition and fees and 50% of the second $1,100, for a maximum credit of $1,650 per student. To qualify for the Hope Credit, your child must be pursuing a degree, going to school at least half time and not have a felony drug conviction.
With the Lifetime Learning Credit, you can claim up to 20% of the first $10,000 paid for college tuition and fees, for a maximum credit of $2,000 per tax return. Unlike the Hope Credit, there is no limit on the number of years you can claim the Lifetime Learning Credit. It may be used for undergraduate and graduate courses and even for tuition and fees when your child is attending school less than half time. But, you can only claim the credit once per tax return, no matter how many children you have enrolled in college at the same time.
The full credits are available to you if your modified adjusted gross income is less than $47,000 if you are a single taxpayer and $94,000 if you are married filing jointly. The credits phase out if your modified adjusted gross income is between $47,000 and $57,000 if you're a single taxpayer, and between $94,000 and $114,000 if you are married filing jointly. You can't get either of these credits if your modified adjusted gross income is $57,000 or above if you are a single taxpayer, $114,000 or above if you are married filing jointly or you are married filing separately.
If you qualify for a Hope Credit or Lifetime Learning Credit, you can still claim the credit even if you make a withdrawal from a 529 plan or ESA. You just can't apply the credits based on expenses paid with 529 or ESA money. Prior to 2002, you could not claim these credits if you made a withdrawal from a 529 or ESA.
More information on the availability of these credits can be found in IRS Publication 970: Tax Benefits for Education.
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