- Act
Taxpayer Relief Act of 1997
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- Education Credits
IRS Form 8863, Education Credits, must be submitted with the taxpayer's tax return in order to claim the Hope Scholarship and Lifetime Learning credits. The eligible amount of the tax credit that can be claimed is calculated using this form based on information provided by the taxpayer.
Eligible Educational Institution
Generally includes any accredited public, nonprofit, or proprietary post-secondary institution.
Eligible Student - Hope Scholarship
For purposes of the Hope Scholarship Credit, an eligible student must be enrolled at least half-time in an eligible program leading to a degree or certificate at an eligible educational institution during the calendar year and must not have completed the first of two years of such undergraduate study. The student can claim the credit if the student is not claimed as a dependent by another taxpayer; this means the eligible student may also be the eligible taxpayer.
Eligible Student - Lifetime Learning Credit
For purposes of the Lifetime Learning Credit, an eligible student is one that is beyond the first two years of college, or taking classes part-time to improve or upgrade their job skills at an eligible educational institution during the calendar year. This includes seminars, conferences, non-credit courses, etc.
Eligible Taxpayer
An eligible taxpayer must file a tax return and owe taxes to claim the higher education credits available through the Taxpayer Relief Act of 1997. The taxpayer must claim the eligible student as a dependent, unless the credit is for the taxpayer or the taxpayer's spouse. There are limitations on the amount of the credit based on the Adjusted Gross Income (AGI) of the family filing the return. If the taxpayer is married, a joint return must be filed.
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- Half Time
All Wesleyan University undergraduate students are considered full time.
Hope Scholarship
The Hope Scholarship is a tax credit, not a scholarship. For students in the first two years of college (or other post-secondary training), taxpayers can claim a maximum credit of $1,500 per tax year for each eligible student. The credit can only be claimed in two taxable years but not beyond the year when the student completes the first two years of college. The student must be enrolled at least half time in a program leading to a degree, certificate, or other recognized educational credential for at least one academic period during the calendar year. The credit can only be applied against payments made after December 31, 1997 for academic periods beginning after that date. The amount of the credit is phased out at certain income levels. See income phase-out for more information.
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- Income Phase-Out - Hope/Lifetime Learning
The amount a taxpayer may claim as a Hope Scholarship or 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 the credit. Both the dollar limitation on the expenses for which the credit may be claimed and the modified adjusted gross income limitation will be indexed for inflation in 2002 and years thereafter.
Income Phase-Out - Student Loan Interest
To claim the maximum deduction, a taxpayer must have modified adjusted gross income of $40,000 or less ($60,000 for married taxpayers filing jointly). The amount of the taxpayer’s deduction is gradually reduced for taxpayers with modified adjusted gross income between $40,000 and $55,000 (between $60,000 and $75,000 for married taxpayers filing jointly). For example, for 1998, the maximum deduction a single taxpayer with modified adjusted gross income of $47,500 could take would be $500. Taxpayers with modified adjusted gross income above $55,000 ($75,000 for married taxpayers filing jointly) may not claim the student loan interest deduction. The modified adjusted gross income limitations are indexed for inflation after 2002.
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- Lifetime Learning
This tax credit is targeted to those who want to go back to school, change careers, or take a course or two to upgrade their skills and to college juniors, seniors, graduate and professional degree students. Student enrollment can be at any enrollment level in any course of instruction at an eligible educational institution. Taxpayers may claim a maximum credit of $1,000 per tax year per family. The credit can only be applied against payments made after June 30, 1998 for academic periods beginning after that date. The amount of the credit is phased out at certain income levels. See income phase-out for more information.
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- Non-refundable Tax Credit
A non-refundable tax credit means that a taxpayer must owe taxes to claim the credit. The credit is not refundable for families who do not pay taxes or who owe less in taxes than the amount of the tax credit for which the family is eligible.
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- Post-Secondary
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- Qualified Tuition and Related Expenses
These are tuition and fees required for enrollment or attendance at an eligible educational institution. For purposes of the Hope Scholarship Credit and the Lifetime Learning Credit, they do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses.
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- Student Loan Interest Deduction
This is an above-the-line deduction (the taxpayer does not need to itemize in order to claim this deduction) for interest paid in the first 60 months of repayment on private or government backed loans. The amount eligible for the deduction is limited to post-secondary expenses for tuition, fees, books, equipment, room, and board. The amount of the deduction is phased out at certain income levels. See income phase-out for more information.
Student Loan Interest Statement
IRS Form 1098-E, Student Loan Interest Statement is an informational statement required by the IRS to be issued by the eligible educational institution including such information as the amount of student loan interest paid during that tax year (if more than $600).
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- Tax Credit
Tax credits are subtracted directly from the tax a family owes, rather than reducing taxable income like a tax deduction. A family must file a tax return and owe taxes in order to claim these higher education credits available through the Taxpayer Relief Act of 1997.
Tuition Payments Statement
IRS Form 1098-T, Tuition Payments Statement, is an informational statement required by the IRS to be issued by the eligible educational institution that was paid. To assist the student and the IRS in determining if the student qualifies for the Hope Scholarship credit, the university is required to indicate whether the student was enrolled at least half time for one semester during the calendar year. The IRS also requires the university to indicate if the student was enrolled exclusively in graduate level courses. This indicator would disqualify the student from claiming the Hope Scholarship credit. Please see Hope Scholarship and Lifetime Learning for credit requirements.
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- W-9S
IRS Form W-9S is a request for student or borrower's social security number. This form must be completed each year by every student in order for the university to prepare a Form 1098 for that student.
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