• What is the Hope Scholarship Credit?  Answer
• How much tax credit is available with the Hope Scholarship?  Answer
• What expenses qualify?  Answer
• Who is an eligible student?  Answer
• What constitutes an eligible educational institution?  Answer
• Are parents eligible for the Hope Scholarship?  Answer
• When do I file for the Hope Scholarship?  Answer
• I paid tuition, but also received financial aid. Does this affect my eligibility?  Answer
• What happens in the student's third year and beyond? What is the lifetime Learning Credit?  Answer
• What is the new tax benefit for interest paid on educational loans?  Answer
• How much can I deduct for educational loan interest? Can I deduct my full loan payments for the year?  Answer
• Who can qualify for a student loan interest deduction?  Answer

Q.  What is the Hope Scholarship Credit?

The Hope Scholarship is a tax credit available for the first two years of college or post secondary education. It will be offered to students or parents who pay tuition and related expenses for attendance at least half-time in a degree-granting program. Unlike a scholarship or a tax deduction, the Hope Scholarship is a tax credit, and can be subtracted directly from the total federal tax on a tax return.

Q.  How much tax credit is available with the Hope Scholarship?

The amount of credit depends on the taxpayer's income and the amount of tuition paid. The credit can total up to $1500 per student for eligible taxpayers with modified adjusted gross incomes up to $40,000 (or $80,000 for married couples filing jointly). The credit is gradually reduced for taxpayers with incomes between $40,000 and $50,000 (or between $80,000 and $100,000 for married couples filing jointly). Taxpayers with incomes greater than $50,000 (or $100,000 for married couples filing jointly) may not claim the deduction.

Q.  What expenses qualify?

Qualified tuition and related expenses are tuition and fees required for enrollment or attendance at an eligible educational institution. Qualified expenses do not include books, room and board, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living or family expenses.

Q.  Who is an eligible student?

You, your spouse, or an eligible dependent can be an eligible student. The student must be enrolled at an eligible educational institution for at least one academic period (semester, trimester, quarter) during the year.

Q.  What constitutes an eligible educational institution?

An eligible educational institution generally includes any accredited public, nonprofit, or proprietary post secondary institution eligible to participate in the student aid programs administered by the Department of Education.

Q.  Are parents eligible for the Hope Scholarship?

An eligible parent may claim the credit only for the tuition of a dependent child. Generally, a parent may claim his/her unmarried child as a dependent on a tax return if: (1) the parent supplies more than half the child's support for the taxable year and (2) the child is under age 19 or is a full-time student under age 24.

Q.  When do I file for the Hope Scholarship?

Eligible parents or students request the Hope Scholarship Credit on their tax returns when filing their annual tax returns (usually filed by April 15).

Q.  I paid tuition, but also received financial aid. Does this affect my eligibility?

Tuition paid out-of-pocket using cash, credit card or check is eligible. Tuition paid with proceeds from a loan, including Federal Stafford and PLUS loans, is also eligible.

Q.  What happens in the student's third year and beyond? What is the lifetime Learning Credit?

Beginning in July 1998, the Lifetime Learning Credit provides a tax credit to parents and/or students of up to 20% of the first $5,000 of qualified educational expenses, up to $1,000 annually. The income restrictions described above for the Hope Scholarship also apply to the Lifetime Learning Credit. Unlike the Hope Scholarship, the Lifetime Learning Credit does not require students to be in their first two years of study and does not require at least half-time enrollment. Taxpayers may not claim both the Hope Scholarship Credit and the Lifetime Learning Credit for the same student in the same year.

Q.  What is the new tax benefit for interest paid on educational loans?

The interest paid in 2000 and beyond on qualified educational loans may be deductible from taxpayer income. Both student and parent loans are eligible. Interest can be taken as a tax deduction from gross income during the first 60 months (5 years) of repayment on the loan. The deduction is available even if the taxpayer does not itemize deductions on Schedule A.

Q.  How much can I deduct for educational loan interest? Can I deduct my full loan payments for the year?

In 1999, the maximum deduction for interest paid on educational loans is $1,500. This amount will increase through 2001 in $500 increments. Only the interest portion of payments is deductible. Principal repayment is not deductible. Your lender will provide annual statements of interest paid.

Q.  Who can qualify for a student loan interest deduction?

Eligible taxpayers with incomes below $40,000 (or $60,000 for married taxpayers filing jointly) may take the full deduction. The eligible deduction is gradually reduced for eligible taxpayers with incomes between $40,000 and $55,000 (or between $60,000 and $75,000 for married taxpayers filing jointly).

For information call 1-800-829-1040. For forms and publications call 1-800-829-FORM. Information and forms may be accessed from the World Wide Web. The Web address is:

www.irs.ustreas.gov or www.nacubo.org/website/tra97/.

YOU SHOULD CONSULT WITH YOUR PERSONAL TAX ADVISOR FOR FURTHER INFORMATION AND INSTRUCTIONS.