Education Tax Credits

The HOPE Scholarship Credit is equal to 100% of $1,100 of tuition expenses (excluding room, board, or books) and 50% of the next $1,100. The maximum credit per student is $1,650 for 2007. The HOPE Scholarship Credit is only available for the first 2 years of post-secondary education.

The Lifetime Learning Credit is also available for qualified tuition and fees paid for higher education. The maximum Lifetime Learning Credit is 20% of qualified expenses up to $10,000 or $2,000 each year. It's based on total expenses incurred and is not per student.

While the HOPE Scholarship Credit is available for only the first 2 years of college, the Lifetime Learning Credit is available any time. The only restriction is that the HOPE Scholarship Credit and the Lifetime Learning Credit may not be used in the same year, for the same student.

Both credits are nonrefundable. And, they are subject to phase out depending on your income level. To see if you qualify, click here.

If you cannot claim either credit because your income is too high, your child can take the full credit if he or she has tax liability of at least the amount of the credit. However, you cannot claim a dependency exemption for the child, and the child may not claim a personal exemption. Thus, the net savings will be the amount of the credit less the tax benefit of the lost dependency exemption.

Since the dependency exemption may be phased out or lost at your income level, you may not be receiving much benefit anyway.