Tax Credits

Taxpayers can claim one, or in some cases, two tax credits for expenses they pay for post-secondary education for themselves and their dependent children. These tax credits can directly reduce the amount of federal income tax.

• Hope Scholarship Credit
  A tax credit equal to all of the first $1,000 of tuition and fees (less scholarships, grants, and tax-free tuition benefits) and half of the next $1,000 of tuition and fees is available to parents of dependent students or to students who are not claimed as dependents on their parents’ return. The Hope credit can be claimed only for two tax years and applies only to the first two years of post-secondary education. Students must be enrolled at least halftime during at least one academic period that begins during the tax year and cannot have had a drug-felony conviction in a year that the credit applies.
• Lifetime Learning Credit
  This credit applies to tuition and fees for undergraduate, graduate, and continuing education course work. A family can claim on its tax return a credit equal to 20 percent of $10,000 in educational expenses; so the maximum benefit is $2,000 each tax year.

Eligible education expenses are offset by scholarships, grants, and other tax-free tuition benefits.

Education expenses paid for with tax-free grants, scholarships, and employer-education assistance are not eligible for either tax credit. Education expenses paid with loans are eligible for these tax credits. Taxpayers need to consult current IRS rules and/or their tax advisor for individual eligibility.