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Taxpayer Information Page
Students and parents should find the information obtained below useful in understanding the Taxpayer Relief Act of 1997. The information and links are provided for informational purposes ONLY. The University of Michigan can not provide tax advice. Please contact your tax advisor or the Internal Revenue Service at 800.829.1040 with any tax questions you may have.
Education Incentives Of The Taxpayer Relief Act Of 1997
The Act provides taxpayers two new non-refundable tax credits for payments made for qualified tuition and related expenses (tuition and fees, but not expenses such as room and board) for post-secondary education -- the HOPE Scholarship Credit and the Lifetime Learning Credit.
The Hope Scholarship Credit is a tax credit, not a scholarship. Tax credits are subtracted directly from the tax a family owes, instead of being subtracted from taxable income like a tax deduction. A family must file a federal tax return and owe taxes to get this tax credit. A family cannot get a refund for the Hope credit if it does not pay taxes. A family that owes less tax than the maximum amount of the Hope tax credit for which it is eligible can only take a credit up to the amount of taxes owed.
For 2007, A family may claim a tax credit up to $1,650 for each eligible dependent for up to two tax years (100% of the first $1,100 and 50% of the second $1,100 paid for qualified educational expenses). The Hope credit is available only until each student's first two years of postsecondary education are complete.
The exact amount of the Hope credit also depends on a family's income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. The total credit is also based on how many eligible dependents are in the family, rather than a maximum dollar amount for the family as with the Lifetime Learning tax credit.
The Lifetime Learning Credit is a tax credit available to individuals who file a tax return and owe taxes. The amount of the credit is subtracted from the taxes owed, rather than reducing taxable income as with a tax deduction. Individuals who do not pay taxes are not eligible for a Lifetime Learning credit. Taxpayers who owe less tax than the maximum amount of the Lifetime Learning tax credit for which they are eligible can only take a credit up to the amount of taxes owed.
A family may claim a tax credit of up to $2,000 per tax year for the taxpayer, taxpayer's spouse, or any eligible dependents for an unlimited number of tax years. The amount of the Lifetime Learning tax credit is 20% of the first $10,000 of qualified educational expenses paid for all eligible students. Therefore, the maximum amount of a Lifetime Learning tax credit is $2,000. The Lifetime Learning credit is available for all years of postsecondary education and for courses to acquire or improve job skills, unlike the Hope credit which is only available for the first two years.
The actual amount of the credit depends on a family's income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. This credit is family-based (up to $2,000 per tax return) rather than based on the number of dependents in a family as with the Hope credit.
IRS form 1098-T is available each year by January 31 to all students who were registered for an academic term during the previous calendar year. (Example: 2003 Form 1098-T was available by January 31, 2004.) Form 1098-T is used to report demographic and financial information required by the IRS for the Taxpayer Relief Act of 1997. The demographic information includes student name, social security number, address, and yes/no indicator boxes for half time enrollment and graduate level enrollment. The financial information includes amounts billed for qualified tuition and related expenses, including adjustments for prior years; and scholarship and grants, including adjustments for prior years. Students may view/print their form 1098-T and detailed information used to prepare the form in Wolverine Access (Student Business, Financial Information, View Form 1098-T). Students may contact Student Financial Operations if the information is incomplete or believed to be incorrect. Students should be sure to include their full name and UMID number in all correspondence sent to our office.
Additional information on some of the education incentives contained in the Taxpayer Relief Act of 1997 may be obtained at the following web site:
http://www.ed.gov/offices/OPE/PPI/HOPE/index.html
Additional information on how to use the information on the 1098-T for your taxes may be obtained on the IRS web site at the following links:
http://www.irs.gov/pub/irs-pdf/p970.pdf
http://www.irs.gov/pub/irs-pdf/f8863.pdf