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The Hope Scholarship Return to Financial Aid Home What is it? The Hope Scholarship is actually a tax credit, not a scholarship. Tax credits are subtracted from the tax a family owes, rather than reducing taxable income like a tax deduction. A family must file a tax return and owe taxes to take advantage of it. The Hope credit is not refundable for families who do not pay taxes or who owe less in taxes than the maximum amount of the Hope tax credit for which the family is eligible. Maximum Credit A family may claim a tax credit up to $1,500 per tax year for each eligible dependent for up to two tax years. A family may claim up to 100% of the first $1,000 of eligible expenses and 50% of the next $1,000 for a maximum credit of $1,500. The actual amount of the credit depends on the family’s income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from the tuition. The total maximum credit also is based on the number of eligible dependents, rather than a maximum dollar amount for the family, as with the Lifetime Learning tax credit. Who Qualifies? The Taxpayer An eligible taxpayer must file a tax return and owe taxes to claim the credit. The taxpayer must also claim the eligible student as a dependent, unless the credit is for the taxpayer or the taxpayer’s spouse. The taxpayer is eligible for the maximum benefit with an Adjusted Gross Income (AGI) of up to $40,000 for a single taxpayer (or $80,000 for married taxpayers). The credit amount is phased-out between $40,000 and $50,000 for single taxpayers (or $80,000 and $100,000 for married taxpayers). The Student An eligible student must be enrolled at least half time in an eligible program leading to a degree or certificate at an eligible school during the calendar year AND must not have completed the first two years of such undergraduate study. The student may claim the credit if the student is not claimed as a dependent by another taxpayer; this means the eligible student may also be the eligible taxpayer. In addition, the student may not have been convicted of a Federal or State felony drug offense before the end of the tax year in which the academic period occurs. How do you get it? To qualify for the credit, the taxpayer must report the amount tuition and fees paid as well as the amount of certain scholarships, grants and untaxed income used to pay the tuition and fees. Current law specifies that schools will supply this information in the form of a “return” to individual taxpayers and to the IRS. Can a Family Claim Multiple Benefits? A family may claim a Hope credit, a Lifetime Learning credit and an exclusion from gross income for certain distributions from qualified State tuition programs or education IRAs as long as the same student isn’t used as the basis for each credit or exclusion AND the family doesn’t exceed the Lifetime Learning maximum per family as listed in this brochure under “Maximum Credit.”
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