More Information About the HOPE Scholarship Tax Credit

How This Credit Works to Help You Afford Education

The federal government offers a number of tax credits designed to help taxpayers with college expenses or offer incentives for higher education.

The Hope Scholarship Tax Credit is used similarly to the Lifetime Learning Tax Credit, but is packaged with distinctly different terms.

What is the HOPE Scholarship Credit?

The Hope Scholarship Credit is a federally designed program that offers taxpayers the opportunity to reduce the amount of taxes they owe. The credit is a percentage of post-secondary educational expenses for the taxpayer, a spouse or dependent student.

Qualifications for the HOPE Scholarship

Again, you have to file and owe taxes to get this type of credit. The person filing the taxes has to claim an eligible student as a dependent. And there are income restrictions that apply: singles, your income cannot exceed $55,000 if you plan to utilize the credit; for couples who file joint returns the limit is $110,000.

  • Eligible students must be enrolled in a degree or certificate program and attending at least half-time to qualify. Also important: you may only use the Hope Credit for a student’s first two years of school. Best advice: Use the Hope Credit in lieu of the Lifetime Learning Credit for the first two years then switch to the Lifetime Learning Credit.
  • If your family owes less in taxes than the maximum HOPE amount, you can only take the credit up to the amount of the taxes that you owe.

Filing for the Hope Credit

It’s pretty simple to apply for the HOPE Scholarship Tax Credit. Simply report your tuition and fees paid out and any scholarships and grants you used to pay for expenses during the calendar year for which you’re filing. Your school is required to send you and the IRS this information on a form called the 1098-T. Fill out form 8863 to claim the HOPE Scholarship credit. It might be a good idea to check with your tax advisor, too, if you have additional questions.

**Remember, you must apply for the Lifetime Learning Credit or the Hope Credit, but not both.

Tax credits are not about “cheating the system” or trying to manipulate federal taxes. Tax credits are there for a reason—to save hard working people money on the college education they have worked hard to obtain. Don’t miss out on saving money.