The Hope Scholarship Tax Credit is a federal income tax credit provided by the federal government as part of the “American Recovery and Reinvestment Act of 2009″. The Hope Scholarship Tax Credit is not the same program known as the Georgia Hope Scholarship, Tennessee Hope Scholarship, or South Carolina Hope Scholarship. The state programs are for students attending colleges in state and that meet certain financial and GPA based requirements. These are described in other posts on this site.
Hope Scholarship Tax Credit
First, a tax credit is a nice benefit. A credit acts dollar for dollar to remove taxes owed by the tax payer. Unlike a deduction which only applies a percentage of the deduction towards decreasing the tax liability, the tax credit is 100% applied to the tax liability. Here is more information on the tax credit, but, please refer to your financial/tax advisor for the final word on this tax credit and how to use it in your situation.
Amount of the Credit
The hope scholarship tax credit provides a scaled amount of the first $4000 of eligible expenses. The credit is 100% of the first $2000 of eligible expenses. For the next $2000 in expenses, the credit is 25%. So, for $4000 of eligible expenses, the tax credit amount is $2500 max. (Note: the credit is higher for some areas like the Gulf Opportunity Zone which increases the maximum to $3600).
What is really nice is that the tax credit is refundable up to 40% of the amount. If your tax obligation is less than the tax credit, then up to 40% is refunded to the taxpayer. So you may end up with zero tax liability and get a refund back based on the excess hope scholarship tax credit.
Qualified Educational Expenses
- Course Materials. These would be required textbooks
These do not include
- Student activity fees
- athletic fees
- all other non academic related costs
The credit is only available for the first 4 years of higher education expense per student. The credit can also be used for the first 4 years of postsecondary (graduate) education.
Income Phase Out
$80,000-90,000 for single filers and $160,000-$180,000 for married filing jointly.