Massasoit - The Hope Scholarship

Understanding the Hope Learning Tax Credit

What Is It?

The Hope Learning credit is a nonrefundable tax credit, not a scholarship or tax deduction. Tax credits are subtracted directly from the tax a family or student owes, while tax deductions are subtracted from taxable income. To receive the Hope tax credit, a family or student must file a federal tax return and owe taxes. Families and students that don't pay taxes cannot receive money from the Hope credit. If a family or student owes less in taxes than the amount of Hope tax credit they are eligible for, they can only receive a credit equal to the amount of taxes owed.

For the 2008 tax year, a family or student can claim up to $1,800 ($3,600 for students in a Midwestern disaster area) for each eligible student for up to two tax years (100% of the first $1,200 ($2,400 for students in a Midwestern disaster area) and 50% of the second $1,200 ($2,400 for students in a Midwestern disaster area) paid for qualified expenses). The Hope credit is only available until each student's first two years of postsecondary education are complete.

The exact amount of the Hope credit also depends on a family's income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. The total credit is also based on how many eligible students are in a family. This differs from the Lifetime Learning Credit which sets a maximum dollar amount for a family.

Who Qualifies?

The Taxpayer: An eligible taxpayer must file a federal tax return and owe taxes to claim the Hope credit. The taxpayer must also claim an eligible student as a dependent on the tax return, unless the credit is for the taxpayer or the taxpayer's spouse. (This means the eligible taxpayer may also be the eligible student.) In 2008, taxpayers cannot claim a Hope credit if their modified adjusted gross income (AGI) is $58,000 or more for a single taxpayer ($116,000 or more for those filing a joint return). The Hope credit amount is reduced gradually for families with incomes between $48,000 and $58,000 ($96,000 and $116,000 for joint returns). AGI limits were increased by $1,000 for single taxpayers ($2,000 for those filing jointly) in the 2008 tax year.

The Student: An eligible student must be enrolled at least half-time for at least one academic period beginning in 2008 at an eligible program leading to a degree or certificate at an eligible school AND can not have completed the first two years of undergraduate study. You may claim the credit yourself if you are not claimed as a dependent by another taxpayer. (Once again, this means that the eligible student may also be the eligible taxpayer.) Students convicted of a federal or state drug felony before the end of 2008 are not eligible for the Hope credit.

How Do You Get It?

To apply for the credit, taxpayers must report the amount of qualified tuition and fees paid as well as the amount of certain scholarships, grants, and untaxed income used to pay tuition and fees in 2008. Schools are required to send this information to each taxpayer and to the IRS by Jan. 31, 2009, in the form of a 1098-T statement. Taxpayers use this information and their own records about tuition and fees paid when they fill out IRS form 8863 to claim the tax credit. The statement sent by the school will also include contact information for someone at the school who can answer questions about the information on the form. A taxpayer may wish to talk to a tax advisor for help in calculating the amount of the credit.

When Is It Available?

Generally, the credit is allowed for qualified education expenses paid in 2008 for an academic period that begins in 2008 or during the first three months of 2009 (e.g., paying in December 2008 for an academic period beginning in the first three months of 2009).

Can A Family Claim Multiple Benefits?

A family may claim a Lifetime Learning credit, a Hope 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.

Last Update: February 10, 2009

Call Toll Free: 1-800-CAREERS

Official Massasoit Page