Hope Education Tax Credit

The Hope Credit is a federal tax credit for higher education program expenses.

Education Requirements
To claim the Hope credit, the student must be:

  • in the first or second year of school,
  • in an undergraduate program that will result in a degree, certificate, or other recognized education credential, and
  • enrolled at least half-time for at least one academic period during the tax year.

The student can be you, your spouse, or a dependent you claim as an exemption on your tax return.

Hope Credit Amount
The maximum Hope Credit for 2008 is $1,800 per each eligible student per year, but only during the first two years of college or vocational school. There is no limit to the number of students in one family who can claim a Hope credit. (Note: For students in certain Midwestern disaster areas, the credit is $3,600 per student. Designated Midwestern disaster areas include counties in Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin.)

Hope Credit Restrictions
The Hope Credit is reserved for taxpayers whose Modified Adjusted Gross Income (MAGI) is $58,000 or less ($116,000 or less for joint filers). The credit is reduced on a sliding scale for MAGIs between $48,000 and $58,000. Also, this credit is nonrefundable, which means that it can reduce the income tax you owe to zero, but if the credit turns out to be more than all the tax owed, you don’t get the difference refunded to you.

How the Hope Credit is determined
If you’re a student on a single-filer tax return for a MAGI under $48,000, the filer can claim a $1,200 credit for the first $1,200 of qualified education expenses and $600 credit for the next $1,200. For a MAGI between $48,000 and $58,000, there are instructions on the IRS form for figuring out the correct sliding-scale credit. “Qualified expenses” include tuition, fees, and certain other education costs.

How to claim the Hope Credit
You claim the Hope credit by completing Parts I and III of Form 8863 and submitting it with the tax return filer’s Form 1040 or 1040A. The filer can be you, your spouse if you file jointly, or your parent if you’re being claimed as a dependent.

Relevant IRS Forms

  • 1098-T: Your accredited school should send you one in early February. The 1098-T tells the IRS what the school billed you, payments they received from you, and other details related to your enrollment.
  • 8863: To calculate your education tax credit and report it on your 1040.

Read all the terms and conditions related to IRS education tax breaks
For complete, detailed explanations of “qualified expenses,” “eligible school,” “academic period,” allowable “funding sources,” and “Midwestern disaster areas,” carefully read all the information on the IRS 2008 Tax Benefits for Education web site.

Source: U.S. Internal Revenue Service

Please note: This article is intended to be a general overview of an education tax benefit for the tax year 2008. EducationGrant.com does not advise on any personal income tax requirements or issues. Use of any information from this web site is for general information only and does not represent personal tax advice either express or implied. You are encouraged to visit the IRS website for more information and to seek professional tax advice for personal income tax questions and assistance.