October 2000

The IRS offers two education tax credits: the Hope credit and the lifetime learning credit. Both credits are figured by the amount you pay for qualifying tuition and related expenses. The amount eligible for credit is affected by your modified adjusted gross income (MAGI). Credits are subtracted from your owed tax, but if you're eligible for a higher credit than the amount you owe, the IRS won't refund the excess.

	The Hope Credit Hope credits affect academic expenses paid after 12/31/97. The credit is up to $1,500 per student, and is only available for the first two taxable years of post-secondary education per student.
	Lifetime Learning Credit This credit began for expenses paid after 6/30/98 and covers up to 20 percent of the first $5,000 spent per student. Unlike the Hope credit, the lifetime learning credit isn't limited to the first two years of post-secondary education.

Married couples filing separate returns cannot claim either credit. In addition, you lose eligibility to claim education credits if your adjusted gross income (AGI) is $50,000 ($100,000 for couples) or more. The credit decreases if your MAGI is between $40,000 and $50,000 ($80,000 to $100,000 for couples).

Qualified expenses include: Tuition fees from an accredited post-secondary educational institution that is eligible to participate in student aid from the Department of Education Course textbooks Supplies and equipment related to classes Student activity fees		Other expenses that are not eligible, even if they are required for enrollment, include: Room and board Insurance Medical expenses and health fees Transportation Living expenses
For more information on higher-education tax credits, visit the IRS Web site at www.irs.gov or speak with your tax adviser.

This article provides a general overview only. Be sure to contact your tax adviser about your personal situation.