Families Can Have 'Hope' as College Tax Incentives Kick In This Year

With President Clinton having signed an educational tax-cut bill recently, Laredo families can also start taking advantage of the new law that seeks to help families offset college costs.

Among the incentives offered are the Hope Scholarship Tax Credit and the Lifetime Learning Credit.

The Hope Scholarship Tax Credit gives a family a tax break of up to $1,500 per year per student for two years. The Hope Credit is calculated by taking 100 percent of the first $1,000 in qualified tuition and fee expenses and 50 percent of the next $1,000, paid for a total of $1,500.

A family may start claiming the credit for qualified tuition and fee expenses made on or after Jan. 1, 1998, for academic periods beginning on or after Jan. 1, 1998. The first time taxpayers will be able to claim the credit is when they file their 1998 tax returns in 1999. This scholarship may be claimed for more than one individual in the family.

"The beauty here is that the target is the middle income families who can't qualify for Pell Grant," said Dr. Stephen Brown, dean of student affairs.

Brown, who has been in the education business for more than 20 years, said there is more federal assistance now than he can ever remember.

"In this country, there is not one reason financially why every student can't go to college," Brown said.

An individual paying qualified tuition and fee expenses at a postsecondary educational institution may claim the credit with the condition that both the student for whom the expenses are paid and the institution meet certain requirements.

The amount a taxpayer may claim as a Hope Credit is reduced for taxpayers who have modified adjusted gross income between $40,000 ($80,000 for married taxpayers filing jointly) and $50,000 ($100,000 for married taxpayers filing jointly).

Taxpayers with modified adjusted gross income over $50,000 ($100,000 for married taxpayers filing jointly) may not claim the Hope Credit.

A student is eligible for the Hope Credit if: (1) for at least one academic period (e.g., semester, trimester, quarter) beginning during the calendar year, the student is enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential and is enrolled in one of the first two years of postsecondary education, and (2) the student is free of any conviction for a federal or state felony offense consisting of the possession of distribution of a controlled substance.

Another tax reduction incentive which families can take advantage is known as the Lifetime Learning Credit.

Starting on July 1, 1998 through 2002, taxpayers may be eligible to claim a tax credit of up to $1,000 a year, or 20 percent of $5,000 of the taxpayer's out-of-pocket college expenses of all eligible family members.

After 2002, the credit will be equal to 20 percent of the taxpayer's out-of-pocket expenses up to a maximum of $10,000 in expenses. This means that the maximum Lifetime Learning Credit a taxpayer may claim after 2002 is $2,000.

Like the Hope Scholarship Credit, the amount a taxpayer may claim as a Lifetime Learning Credit is gradually reduced for taxpayers who have modified adjusted gross income between $40,000 ($80,000 for married taxpayers filing jointly) and $50,000 ($100,000 for married taxpayers filing jointly).

Taxpayers with modified adjusted gross income over $50,000 ($100,000 for married taxpayers filing jointly) may not claim a Lifetime Learning Credit.

The maximum credit for the Lifetime Learning Credit does not change according to the number of students that the taxpayer is claiming for expenses.

Those who are paying qualified tuition and related expenses at a postsecondary educational institution may claim the credit, with the condition that their institution is an eligible educational institution.

Unlike the Hope Scholarship Credit, students are not required to be enrolled at least half-time in one of the first two years of postsecondary education. Under the Lifetime Learning Credit, even a student taking only one course may be eligible to claim credit, provided that he or she meets the necessary criteria.

For the Lifetime Learning Credit, either the parent or child, but not both, may claim the credit for the child's expenses in a particular year.

Those students, who are not claimed as a dependent on anyone's Federal income tax return and are claiming the Lifetime Learning Credit, may take into account only out-of-pocket expenses in calculating the Lifetime Learning Credit. Qualified tuition and related expenses paid with the student's earnings, a loan, a gift, an inheritance, or personal savings are taken into account in calculating the credit amount. However, qualified tuition and related expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA or tax-free employer-provided educational assistance are not taken into account in calculating the credit amount.

Another provision in the new law is the Deduction for Student Loan Interest. Under this provision, students can deduct from their taxes interest on qualified education loans paid after Dec. 31, 1997. The maximum deduction is limited to $1,000 in 1998, which is increased yearly, reaching the maximum of $2,500 in 2001.

Late Registration for the Spring semester continues through Jan. 26.

For further information, please contact the Office of Financial Aid at 326-2225. University office hours are from 8 a.m. to 5 p.m. Monday -Friday.

Journalists who need additional information or help with media requests and interviews should contact the Office of Public Affairs and Information Services at pais@tamiu.edu