The most common form of tax credit for college students is the Hope Credit and the Lifetime Learning Credit. The Hope Credit is available to students pursuing a degree or certificate, who are in their first two years (Freshman & Sophomore). The Hope covers up to $1,650 for 2006 tax returns (returns filed in 2007). If the students parent(s) declare them as a dependent, the parent(s) should claim the credit. If the student is independent, they can claim the credit themselves. You become ineligible for the credit if you / your parent'(s) income exceeds $55,000 or $110,00 for a joint return.
The lifetime learning credit (LLC) is available for students in any year of postsecondary education. The lifetime learning credit covers 20% of tuition with a $2,000 maximum for 2006 tax returns (returns filed in 2007). In order to be eligible for the LLC, you must fall under the same income limit as the Hope credit. (Above). In order to claim either credit, you must complete IRS Form 8863 which is attached to your / your parents tax return. (1040 or 1040A). Click Here to view IRS Form 8863 with detailed instructions. The document is a PDF file, which can be viewed with Adobe Acrobat Reader. You may download this software for free, just click the link provided.
For further information click the IRS logo / link below to obtain IRS Publication 970 "Tax Benefits for Education," which explains the Hope and Lifetime Learning Credits in further detail. It also discusses education deductions, qualified tuition programs, education IRA's, etc. (File Size 417k)
Accounting News |
CPA Review |
Accounting Message Board
|Copyright © 1998 - 2007 James L Cave, CPA. All Rights Reserved.|