In an effort to make college more affordable, Congress
included in the Taxpayer Relief Act of 1997 (TRA97): the Hope
Scholarship Tax Credit and the Lifetime Learning Tax Credit. By January
31st, the University will mail all students the information that they
need in order to apply for those credits.
Hope Scholarship tax credit for 2008: The Hope Scholarship provides tax credits
to taxpayers who pay qualified tuition and required fees for attending
college on at least a half-time basis. This credit is designed to offset
tuition costs incurred during the first two years of college. It may
only be used two years for any particular student. This credit is available
for tuition and required fees paid, minus certain grants, scholarships,
and other tax-free educational assistance. The maximum credit is $1800
per student.
Lifetime Learning Tax Credit for 2008: Like the Hope Scholarship credit, the
Lifetime Learning provides tax credits to taxpayers who pay qualified
tuition and required fees at an eligible institution. It differs from
the Hope scholarship in that the student is not required to be half
time. A family may claim a credit for up to $2000 per tax year . The
Lifetime Learning tax credit is available for tuition and required fees
less certain grants, scholarships and other tax-free educational assistance.
A tax credit reduces the
amount of income tax you may have to pay. Unlike a deduction, which
reduces the amount of income subject to tax, a credit directly
reduces the tax itself. The Hope credit and the Lifetime Learning
credit are non-refundable credits. This means that it can reduce
your tax to zero, but if the credit is more than your tax the excess
will not be refunded to you.
The Hope credit and Lifetime Learning credit you are allowed may be limited by the amount of your income and the amount of your tax.
Hope and lifetime learning credits. Beginning in 2008, the amount of your Hope or lifetime learning credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $48,000 and $58,000 ($96,000 and $116,000 if you file a joint return). You cannot claim a credit if your MAGI is $58,000 or more ($116,000 or more if you file a joint return). This is an increase from the 2007 limits of $47,000 and $57,000 ($94,000 and $114,000 if filing a joint return). For more information, see chapters 2 and 3 of Publication 970.4
Rules That Apply to Both Credits
Generally, qualified education expenses are amounts paid in 2008 for tuition and fees required for the student’s enrollment or attendance at an eligible educational institution. It does not matter whether the expenses were paid in cash, by check, by credit card, or with borrowed funds.
Qualified education expenses do not include amounts paid for:
Differences Between the Lifetime Learning and Hope Credits
There are several differences between these two credits. For example, you can claim the Hope credit based on the same student’s expenses for no more than 2 years. However, there is no limit on the number of years for which you can claim a Lifetime Learning credit based on the same student’s expenses.
Anyone planning to make use of these credits will need
much more specific information than is provided above. Listed below
are some sources of more detailed information:
1) IRS phone number: 800-829-1040
2) To download IRS publications or forms, please go
to:
http://www.irs.gov/formspubs/index.html
Enter 970
for the tax "publication" or 8863 for the tax "form".
University of Oregon employees cannot offer tax advice. However, if
you have questions about the information provided on the form 1098-T,
you may contact a University of Oregon representative after February
1st at (541) 346-3170 or email at:
kthomps@uoregon.edu. You
may order a duplicate 1098-T by calling (541) 346-3160.
You should be aware that the law creating these credits requires the University to provide the name and social security number of all enrolled students to the IRS. It is important that the information be accurate. If we do not have your social security number, or if it is incorrect, you will need to complete IRS form W-9S, available at the University of Oregon Business Office, and submit it to the University.
Who Can Take the Credits
You may be able to take the credits if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. The credits are based on the amount of qualified education expenses paid for the student in 2008 for academic periods beginning in 2008 and the first three months of 2009.
Caution-Qualified education expenses must be reduced by any expenses paid directly or indirectly using tax-free educational assistance.
Please note that if a student is claimed as a dependent on another person’s tax return, only the person who claims the student as a dependent can claim the credits for the student’s qualified education expenses. If a student is not claimed as a dependent on another person’s tax return, only the student can claim the credits.
Who Cannot Take the Credits
Generally, qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Therefore, you are treated as having paid expenses that were paid from your dependent student’s earnings, gifts, inheritances, savings, etc.
You cannot take the education credits if any of the following apply.
Student Loan Interest Deduction
Income limits increased. If you are married and file a joint return, the amount of your student loan interest deduction for 2008 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $115,000 and $145,000. You cannot take a deduction if your MAGI is $145,000 or more. This is an increase from the 2007 limits of $110,000 and $140,000.
Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, if your modified adjusted gross income (MAGI) is less than $70,000 ($145,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2008.
The student loan interest deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040).
Student Loan Interest Deduction at a Glance
Do not rely on this table alone. Refer to Chapter 4 of Publication 970 for complete details.
| Feature | Description |
| Maximum Benefit | You can reduce your income subject to tax by up to $2,500. |
| Loan Qualifications |
Your student loan: must have been taken out solely to pay qualified education expenses, and - cannot be from a related person or made under a qualified employer plan |
| Student Qualifications |
The student must be: - you, your spouse, or your dependent, and - enrolled at least half-time in a degree program. |
| Time limit on deduction | You can deduct interest paid during the remaining period of your student loan. |
| Phaseout | The amount of your deduction depends on your income level. |
Can You Claim the Deduction?
Generally, you can claim the deduction if all of the following requirements are met.