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Section II
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Section III
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Section IV
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Section V
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Section VI
For information and instructions regarding your federal income tax returns, call 1-800-TAXFORM. For free copies of Student's Guide Publication 4, Educational Expenses 508, and Scholarships and Fellowships 520.
Tax Credits and Deductions
A tax credit is money that is refunded annually (after you submit your annual tax return to the federal government) or within your regular paycheck. A tax credit is a direct reduction, dollar for dollar, from your tax liability.
Child and Dependent Care Credit. A percentage of childcare or disabled care expenses is refunded to taxpayers.
Earned Income Credit. Available to those individuals who have earned income but the modified adjusted gross income on their tax returns is less than a pre-specified amount. Check with the state and federal IRS or a current tax guide for information on qualifying for this credit.
Child Credit. For each child under age 17, a $500 credit is available to couples with an adjusted gross income of $110,000 or less and to single individuals with adjusted gross income of $75,000 or less.
Student Loan Interest Deductions. You and/or your parents can deduct on your tax returns the interest paid during the first 60 months of repayment on student loans. This deduction is available even to those who do not itemize their deductions. The maximum deduction allowed is $2000 for the year 2000 and increases to $2500 in 2001 and beyond. The deduction is available for all educational loans to students, parents, guaranteed student loans, and loans from private lenders made after August 1997, when the new student loan interest deduction became law. Consult with current tax law or a tax advisor for adjusted gross income requirements.
Education IRA. For each child under age 18, families may deposit $500 per year into an Education IRA in the child's name. Earnings will accumulate tax-free, and no taxes will be due upon withdrawal if the money is applied to pay for postsecondary tuition, required fees, books, equipment, and eligible room and board expenses. Consult current tax law or a tax advisor for adjusted gross income requirements and other eligibility guidelines.
IRA Withdrawals. Since January 1, 1998, taxpayers may withdraw funds from an IRA, without penalty, for their own qualified higher education expenses or those of their spouse, child, or even grandchild. Qualified expenses are limited to tuition, fees, books, equipment, and room and board.
HOPE Scholarship Tax Credit. This tax credit applies to the first two years of college or vocational school training. Students receive a 100% tax credit for the first $1,000 of tuition and required fees, and a 50% credit on the second $1,000 for a maximum allowable credit of $1,500 per student per year. This applies only to fees not paid by a grant or scholarship. Consult current tax code or a tax advisor for adjusted gross income requirements and eligibility guidelines.
Lifetime Learning Credit. This tax credit applies only to college juniors, seniors, graduate and professional degree students and to other adults who want to go back to school, change careers, or take a course or two to upgrade their skills. A family will receive a 20% tax credit for the first $5,000 of tuition and required fees paid each year through 2002, and for the first $10,000 thereafter. The Lifetime Learning tax credit is available for tuition and required fees less grants, scholarships, and other tax-free educational assistance. Consult with a tax advisor or current tax code for additional specific guidelines. Look for tax advice at http://www.irs.gov.
You cannot take both the Hope Tax Credit and Lifetime Learning Credits the same year.
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