Two federal tax credits, the Hope Scholarship Credit and the Lifetime Learning Credit, went into effect during 1998. They are designed to help reduce expenses for tuition and other qualified expenses paid to eligible postsecondary institutions.
A tax credit subtracted from the tax your family owes. Your family must file a federal tax return and owe taxes to get this tax credit. Your family may claim a tax credit up to $1,500 for each eligible dependent for up to two tax years (100% of the first $1,000 and 50% of the next $1,000). Payments by a taxpayer's dependents are to be treated as having been made by the taxpayer. An eligible student must be enrolled at least half-time in an eligible program leading to a degree or certificate at an eligible school during the calendar year and must not have completed the first two years of undergraduate study. The taxpayer may claim Hope Credit for qualified expenses paid January 1, 1998 and after.
A tax credit available to individuals who file a tax return and owe taxes. Your family may claim a tax credit up to $1,000 per tax year ($2,000 beginning 2003) for an unlimited number of tax years. A family may claim up to 20% or $5,000 of eligible expenses ($10,000 after 2003). Payments by a taxpayer's dependents are to be treated as having been made by the taxpayer. An eligible student may be enrolled at least one-half time in an eligible program leading to an undergraduate or graduate degree at an eligible school during the calendar year or may be enrolled an any enrollment level in any course of instruction at an eligible school to acquire/improve the student's job. The taxpayer may claim the Lifetime Learning Tax Credit for qualified expenses paid July 1, 1998 and after.
Refer to IRS T-1098 form mailed February 1 each year.