Taxpayer Relief Act

The Taxpayer Relief Act of 1997 may offer you the opportunity for tax savings through the Hope Scholarship Credit and/or the Lifetime Learning Credit. Taxpayers may be able to claim tax credits for themselves and their dependent children. Educational expenses paid for with tax-free grants, scholarships, and employer-education assistance are not eligible for either credit. Qualified education expenses paid with loans are eligible for these tax credits.

Hope Scholarship Credit

The Hope Scholarship Credit is available on a per-student basis for the first two years of postsecondary education. A tax credit equal to all of the first $1,000 of tuition and fees (less scholarships, grants, and tax-free tuition benefits) and half of the next $1,000 of tuition and fees is available to parents of dependent students or to students who are not claimed as dependents on their parents' return. The maximum credit is $1,500. The Hope credit can be claimed only for two tax years and applies only to the first two years of postsecondary education. Students must be enrolled at least half time during at least one academic period that begins during a tax year and cannot have had a drug felony conviction in a year that the credit applies. Education expenses paid on or after January 1, 1998 are eligible for the Hope credit.

Lifetime Learning Credit

The lifetime learning credit applies on a tax-return basis and covers a broader time frame and range of educational courses. This credit applies to tuition and fees for undergraduate, graduate, and continuing education course work. A family can claim on its tax return a credit equal to 20 percent of $5,000 of educational expenses; so the maximum benefit is $1,000 each tax year. Scholarships, grants, and other tax-free tuition benefits offset eligible education expenses. Education expenses paid on or after July 1, 1998 are eligible for the Lifetime Learning credit.

Who is Eligible for the Education Tax Credits

The full value of both education tax credits is available to married taxpayers filing jointly with an adjusted gross income (AGI) of $80,000 or less and to single taxpayers with an AGI of $40,000 or less. The tax credits phase out gradually. Once married taxpayers' AGI exceeds $100,000 or single taxpayers' AGI exceeds $50,000, they are not eligible for these credits. Taxpayers may not use both credits for the same student in a single year nor may they combine these credits with tax-free withdrawals from education IRAs.

Rhode Island College's intent is not to offer tax advice but to alert students and parents of the potential tax credit. Please contact a tax professional or the IRS at (800) 829-1040 or the IRS Office of Public Liaison at (202) 622-2970 for details.

Additional information related to the Taxpayer Relief Act can be found at:

• United States Department of Education