How to Apply for the Hope Credit

If you, or your dependent, are in the first two years of post high school education (a college freshman or sophmore), you are probably eligible to apply for the Hope Credit (Hope Education Credit). The student must be attending an accredited institution, be taking at least half the full course load (usually, that means 6 hours of credit or, typically, two classes), and have never been convicted of a drug felony.

Simply total the tuition and qualified expenses that you paid for this student during the eligible tax year. Qualified expenses include tuition and, if required for attendance, activity fees, book fees and supplies. Be sure to read all the rules before claiming something on the Hope Credit. A note: if you pay these expenses in one year for classes being taken the next year – for example, paying in December for classes starting in January – you can get the credit for the year in which you paid the qualifying expenses. So if you pay for classes in December of 2006, even though the classes do not start until January of 2007, your first eligible tax year for the Hope Credit is 2006.

The total available tax credit is $1500. Unless there are income limitations, this will generally come out to be all of the first $1000 of expenses incurred, and half of the second $1000 of expenses incurred. These income limitations start at $80,000 for a married, filing jointly, household, and $40,000 for a head of household, qualifying widow(er) or single household. You cannot claim the Hope Education Credit if you are married and filing separately.

The form that is used in applying for a Hope Credit in IRS form 8863, which can be located on the Internet at: http://www.irs.gov/pub/irs-pdf/f8863.pdf .  You fill out parts 1 and 3 for the Hope Education Credit; the same form is also used to apply for another type of tax credit known as the Lifetime Learning Credit. This credit can, under certain conditions, be claimed any time after the first two years of post high school education. (For more information on the Lifetime Learning Credit, see: http://www.irs.gov/publications/p970/ch03.html)