The Taxpayer Relief Act of 1997 (TRA97) created two nonrefundable education tax credits entitled the Hope Scholarship Credit and the Lifetime Learning Credit.The information provided here is neither comprehensive nor definitive. Whether a taxpayer may take advantage of these benefits depends on the taxpayer's individual facts and circumstances. Taxpayers cannot use both credits for the same student in a single year.
If you have questions about your eligibility, you should contact the IRS at (800) 829-1040 or your own tax advisor. Sacramento State cannot give advice about your eligibility or which fees are eligible for consideration. Further information can be obtained using the Related Links provided at the bottom of this page.
Income Limit Qualification
To qualify for either of these tax credits, the taxpayer must meet specific income limits. Taxpayers with modified adjusted gross income over $50,000 ($100,000 for married taxpayers filing jointly) may not claim either of these tax credits. The amount a taxpayer may claim is gradually reduced for taxpayers who have modified adjusted gross income between $40,000 ($80,000 for married taxpayers filing jointly) and $50,000 ($100,000 for married taxpayers filing jointly). Married taxpayers may claim the credit only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.
How Taxpayers Obtain TRA97 Credits
Taxpayers use IRS Form 8863 to claim Hope and Lifetime Learning tax credits.
How Schools Report TRA97 Information
An eligible postsecondary educational institution, such as your college or university (e.g. CSU, Sacramento), which receives payments for qualified tuition and related expenses on your behalf must send a Form 1098-T to the IRS, and must also provide a copy to you.
Hope Scholarship Credit
Taxpayers may be eligible to claim a nonrefundable Hope Scholarship Credit against their federal income taxes. The Hope Scholarship Credit may be claimed for the qualified tuition and related expenses of each student in the taxpayer's family (i.e., the taxpayer, the taxpayer's spouse, or an eligible dependent) who is enrolled at least half-time in one of the first two years of postsecondary education and who is enrolled in a program leading to a degree, certificate, or other recognized educational credential.
Eligible taxpayers may claim this credit for tuition and fees up to a maximum of $1,500 for each student. The credit can be applied toward 100 percent of the first $1,000 and 50 percent of the next $1,000 of qualified expenses.
To be eligible, the student must be enrolled at least half-time in at least one academic period that begins during a tax year. Nonresident aliens generally are ineligible to claim the Hope Scholarship credit. Eligible expenses for this credit are offset by scholarships, grants, and other tax-free tuition benefits.
Lifetime Learning Credit
Taxpayers may be eligible to claim a nonrefundable Lifetime Learning Credit against their federal income taxes. The Lifetime Learning Credit may be claimed for the qualified tuition and related expenses of the students in the taxpayer's family (i.e., the taxpayer, the taxpayer's spouse, or an eligible dependent) who are enrolled in eligible educational institutions (e.g. Sacramento State).
The Lifetime Learning Credit is for students who take one or more classes from a college, university or other post-secondary institution. If no one claims you as a dependent on a federal income tax return for the year, you may be able to claim these tax credits. Either the parent or the child may claim these credits in a particular year, but not both.
This credit applies to tuition and fees for undergraduate, graduate, and continuing-education courses. Taxpayers can claim up to 20 percent of $5,000 of qualified expenses for tuition and related fees. The maximum benefit is $1,000 for each tax year. Unlike the Hope Scholarship Credit, the Lifetime Learning Credit is calculated on a per family, rather than a per student, basis.
Part-time and full-time students are eligible for the Lifetime Learning credit. Unlike the Hope Scholarship credit, you are not required to be enrolled at least half-time in one of the first two years of postsecondary education. You may be eligible to receive a partial credit, even if you are taking only a single course at an eligible education institution. However, you must be within the income limits described above. Also, nonresident aliens generally are ineligible to claim the Lifetime Learning credit. Eligible expenses for this credit are offset by scholarships, grants, and other tax-free tuition benefits.
Links Related to Hope Scholarship and Lifetime Learning Credits
For more information on qualifications and how to claim these tax credits use the links below.
- Hope Scholarship Credit - contains a description and frequently asked questions
- Lifetime Learning Credit - contains a description and frequently asked questions
- Hope Scholarship Credit and Lifelong Learning Credit Information Document - this is a general description of the Hope Scholarship Credit and the Lifetime Learning Credit provided by the National Association of Student Financial Aid Administrators
- Publication 970, Tax Benefits for Higher Education; Education Tax Credits (pdf) - this is the IRS Publication that specifically discusses in detail the rules and qualifications of the Hope Scholarship Credit and the Lifetime Learning Credit. Also included is information on:
- Education individual retirement accounts (now known as Coverdell ESA)
- Withdrawals from traditional or Roth IRAs
- Interest paid on certain student loans
- The cancellation of certain student loans
- Qualified state tuition programs
- Interest earned on certain savings bonds
- Employer-provided educational assistance benefit
- Important changes for 2002
- 1998 Form 8863 Education Credits (Hope and Lifetime Learning Credits) (pdf) - this is the form used to claim the Hope Scholarship and/or Lifetime Learning Credit (in PDF format)
Other Related Links