Tax benefits

There are several tax benefits that are available to help families meet the costs of postsecondary education. These benefits are a part of the Taxpayer Relief Act of 1997. The tax benefits include the Hope Scholarship, Lifetime learning tax credit, student loan interest deduction, and Educational IRA's.

HIGHER EDUCATION TAX CREDITS INFORMATION SUMMARY SHEET

	HOPE SCHOLARSHIP CREDIT	LIFETIME LEARNING CREDIT
Who may be eligible for the tax credit	A student is eligible for the Hope Scholarship 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.	An individual paying qualified tuition and related expenses at a postsecondary educational institution may claim the credit, provided the 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.
Number of years credit is available	The credit may be claimed in no more than two years for each student - the first two years of postsecondary education.	Unlike the Hope Scholarship Credit, there is no limit to the number of years in which a Lifetime Learning Credit may be claimed for each student.
How is the credit calculated	The credit amount is 100 percent of the first $1,000 of the taxpayer's out-of-pocket expenses for qualified tuition and related expenses, plus 50 percent of the next $1,000 of the taxpayer's out-of-pocket expenses for qualified tuition and related expenses. Therefore, the maximum credit amount for the expenses of an eligible student is $1,500.	The credit is equal to 20 percent of the taxpayer's out-of-pocket expenses for qualified tuition and related expenses of all eligible family members, up to a maximum of $5,000 in expenses annually through 2002. Thus, the maximum Lifetime Learning Credit a taxpayer may claim through 2002 is $1,000.
Effective dates of credit	Qualified tuition and related expenses made on or after January 1, 1998 for academic periods beginning on or after January 1,1998	Qualified tuition and related expenses made on or after July 1,1998, for academic periods beginning on or after July 1, 1998

PROVISIONS WHICH APPLY TO BOTH HOPE & LIFETIME LEARNING CREDITS

What are qualified expenses	The term "qualified tuition and related expenses" means the tuition and fees an individual is required to pay in order to be enrolled at or attend an eligible institution. Amounts paid for any course or other education involving sports, games, or hobbies are not eligible for the credit, unless the course or other education is part of the student's degree program. Charges and fees associated with room, board, student activities, athletics, insurance, books, equipment, transportation, and similar personal, living, or family expenses are not qualified tuition or related expenses.
How are out of pocket expense determined	The student may take into account only "out-of-pocket" expenses in calculating the credit. Qualified tuition and related expenses paid with the student's earnings, a loan, a gift, an inheritance, or personal savings (including savings from a qualified state tuition program) 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.
What are the income restrictions	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. The income limits will be adjusted for inflation after 2001

The above information is excerpts from IRS publications and other informational sources. This information is only a partial listing of the conditions and eligibility requirements for the tax credits. Please consult your tax adviser or the IRS to determine your eligibility for educational tax credits. Please note this information is not intended as tax advice.

• NACUBO - Information on Hope Scholarship & Lifetime Learning credits and student loan interest deductions.

• IRS - Tax information, forms, etc. Look for "2003 Form 8863 Education Credits" on the list of available forms, IRS Notice 97-60 (Q&A Regarding Hope Scholarship and Lifetime Learning tax credits), and IRS Publication 970 (information on Hope Scholarship, Lifetime Learning credits, and student loan interest deductions).

• Adobe Acrobat Reader - Some of the above links may require that you have Acrobat Reader. It's free software available through Adobe.

Please note the following:
The rules and regulations regarding these tax benefits are very complex. Minnesota State Colleges and Universities cannot give personal tax advice. Taxpayers are strongly encouraged to consult the various publications, IRS or a personal tax advisor for assistance in determining eligibility for these tax benefits.

For parents contacting campuses to obtain information to complete tax returns, please be aware that the campuses can not provide information to parents without consent from the student or verification of dependent status as evidenced by providing a copy the most recent tax return. We regret any inconvenience however we are compelled by our obligation to respect the privacy rights of our students.