Here are some features common to the Hope credit and the Lifetime Learning credit:
Both credits are for qualified tuition and related expenses.
Both credits can be used for prepaid expenses.
Both credits are for taxpayers with modified adjusted gross incomes of less than $53,000 ($107,000 for joint filers). The credits start being phased out for taxpayers with modified adjusted gross incomes greater than $45,000 ($90,000 for joint filers). These are the thresholds for 2006; they may be higher for 2007.
Both credits are nonrefundable, meaning that if they more than wipe out your tax bill for the year, you do NOT get a refund check for the excess amount.
Neither credit is available for those who are married filing separately.
Both credits are only for expenses paid for eligible students.
The Hope credit provides a maximum credit of $1,650 per eligible student in any given tax year (100% of the first $1,100 of expenses and 50% of the next $1,100 of expenses). See below for special rules for 2005 and 2006 for students who attend college in areas affected by Hurricane Katrina.
The Hope credit is per eligible student, not per tax return, so several Hope credits can be claimed on a single tax return.
You can claim the Hope credit for any number of eligible students.
The Hope credit can be claimed for only two tax years for each eligible student.
To qualify for the credit, the eligible student must be enrolled in one of the first two years of post-secondary education (generally, the freshman or sophomore years of college).
The academic program must lead to a degree, certificate, or other recognized educational credential.
During the tax year, the student must be at least a half-time student for at least one academic period.
No Hope credit is allowed for anyone with a felony conviction for possessing or distributing a controlled substance.
For more information, you may want to visit the following:
Interview for Form 8863
Form 8863
IRS Publication 970, Tax Benefits for Higher Education
The lifetime learning credit provides a maximum credit of $2,000 (20% of up to $10,000 of expenses) in any given tax year for expenses paid by the taxpayer. See below for special rules for 2005 and 2006 for students who attend college in areas affected by Hurricanes Katrina.
The lifetime learning credit is per tax return, not per student, so the maximum lifetime learning credit that you can take in a given year is $2,000. The lifetime learning credit does not increase based on the number of students in a family.
The lifetime learning credit is not based on the student's workload. It is allowed for one or more courses.
The lifetime learning credit is not limited to students in the first two years of post-secondary education.
Expenses for graduate-level degree work are eligible for the lifetime learning credit.
The lifetime learning credit is not limited to two years or any other number. As the name suggests, it can be used for education expenses that arise over a lifetime.
Special double credits in Hurricane disaster areas. Students who attend colleges in New Orleans and other areas of the Gulf Coast hit by Hurricanes Katrina, Rita and Wilma are eligible for Hope and Lifetime Learning credits double the normal size — $3,300 for Hope credits and $4,000 for Lifetime Leaning credits. The higher amounts apply for 2005 and 2006.
For more information, you may want to visit the following:
Interview for Form 8863
Form 8863