Tax Credit for Postsecondary Education
The Hope Scholarship is a federal income tax credit for students pursuing postsecondary education. Taxpayers can receive up to $2,500 per student per year on qualifying expenses in the first four years of their higher education. Qualifying expenses include tuition, fees, and course materials (e.g. textbooks) incurred by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent. Note: the amount of the credit is 100% of the first $2,000 in qualified expenses and 25% of the second $2,000, and the expenses must be related to the student’s academic course of instruction.
How do I know if I qualify to deduct the Hope credit? An eligible student must meet all of the following requirements:
- Student must be enrolled in a program that leads to a degree, certificate, or other recognized educational credential. This could include a college, university, community college, or trade school.
- Student must be taking at least half of the normal full-time work load for his/her course of study for at least one academic period beginning during the calendar year.
- Student may not have a felony conviction for possessing or distributing a controlled substance.
If you, or your spouse or dependent, meet the criteria above, then you should definitely track the educational expenses you are incurring this year and deduct them on your next tax refund. Even if you are receiving scholarships, grants, or other federal assistance, this tax credit is available to you. There are a few other limitations, or things to note, about the Hope tax credit:
- You may only take the credit during the first two years of your post-secondary education. Likely, the first tax year will correspond to the fall of the student’s freshman year in college, and the second tax year will correspond to the spring of the freshman year and the fall of the sophomore year.
- The qualifying expenses do not include student activity fees, athletic fees, insurance costs, or room and board expenses.
- You may not take both a Hope credit and a Lifetime Learning Credit for tuition and fees deduction for the same student in the same year. The credits would need to cover different educational expenses.
Lastly, and important for many to know, is that this tax credit is partially refundable. This means that if the taxpayer does not have sufficient tax liability to fully offset the tax credit, up to 40% of the amount of the tax credit may be refunded to the taxpayer. For example, if a low-income family has $4,000 in education expenses (enough for a $2,500 tax credit) but no tax liability, the taxpayer may obtain a refund of up to $1,000 from the Hope Scholarship tax credit.