Step Three - Make Financial Arrangements
Income Tax Credit for Education
The Taxpayer Relief Act (TRA) of 1997 provides for tax benefits in the form of educational tax credits (Hope and Lifetime Learning), Individual Retirement Arrangement (IRA) options, and a deduction for student loan interest.
Hope Scholarship - The HOPE Scholarship allows a tax credit of 100% of the first $1,000, and 50% of the next $1,000 spent on the first two years of post-high school education. Only tuition and fees are eligible and the student must be a dependent enrolled at least half-time. Credit is phased out where parents joint income is between $80,000 and $100,000, one-half of this amount for single taxpayers.
Lifetime Learning Tax Credit - The Lifetime Learning Credit allows a maximum tax credit of $1,000, regardless of number of students in the family. The credit is 20% of tuition and fees up to $5,000. Credit is phased out where parents joint income (AGI) is between $80,000 and $100,000, one-half of this amount for single taxpayers.
You are encouraged to consult your tax adviser to obtain full advantage of these new tax benefits. IRS Publication 970, Tax Benefits for Higher Education, provides additional information on these new benefits. This publication can be obtained from the IRS (voice 800/829-3676) or Internet http://www.irs.ustreas.gov .
