The Hope credit is one of the tax benefits available to taxpayers who pay education expenses while they're attending higher education at an eligible educational institution. It is nonrefundable, but will directly reduce the tax liability by up to $1800 ($3600 for students in a Midwestern disaster area).
Taxpayers can claim the full credit for each eligible student for whom at least $2400 ($4800 for students in Midwestern disaster area) of qualified education expenses were paid during the year.
The Internal Revenue Service (IRS) considers any college, university, vocational schools or other postsecondary educational institutions as eligible institutions.
In order to claim the Hope credit on the federal income tax return, the taxpayer must meet the following requirements:
- The student should not have had educational expenses that were used to claim the Hope credit within the past two years.
- The student must not have completed the first two years of postsecondary education.
- The student must be enrolled at least half-time in an academic program which will eventually lead to the award of a degree, certificate or other recognized academic credentials.
- The student can not have been convicted of a state or federal felony for possessing or distributing a controlled substance by the end of the tax year.
The Hope credit is based on qualified education expenses which the taxpayer pays either for self, spouse or for a qualified dependent. The dependent must be one who is claimed by the taxpayer on his federal income tax return. The IRS considers the following to be eligible expenses: tuition, student activity fees, expenses for course-related books, supplies and equipment. These expenses must be incurred and paid for by an eligible student within the academic year. The student could be the taxpayer, a spouse or a qualified dependent.
Certain taxpayers are not eligible to claim the Hope credit. A married person filing separately, or an individual claimed as a dependent on someone else's income tax return, cannot claim the hope credit. If the taxpayer (or the spouse in case of married couples) was a nonresident alien during any part of the year, and elected to be treated as a non-U.S. resident for income tax purposes, she will not be eligible to claim the Hope credit. Additionally, taxpayers whose modified adjusted gross income is $58,000 or more ($116,000 or more if married filing jointly), cannot take the Hope credit.