Higher learning can be an expensive investment especially for part-time adult students who typically are not eligible for the kind of scholarships and financial aid packages including grants and loans many 18-22 year old undergraduates enjoy. The Tax Relief Act of 1997 includes two tax credits which can be of special relevance to adult students: the HOPE Scholarship and Lifetime Learning. Unlike normal scholarships, these tax credits reduce the amount you pay on your tax return, allowing you more money to pay for college. The best part is that many students are eligible.

The HOPE Scholarship Tax Credit

The HOPE Scholarship Tax Credit is for students in the first two years of college. The student can claim a tax credit equal to 100% of the first $1,000 spent on tuition and 50% on their second $1,000. In essence, students can claim a $1,500 credit on their tuition. The credit is only applicable if the student is in an eligible degree program and enrolled at least half-time. The student must have no prior felony drug convictions, and a family can claim one credit per student.

Eligibility for the credit is also limited to taxpayers with a modified adjusted gross income of $50,000, or $100,000 on a joint return. Also, taxpayers with a gross income falling between $40,000 and $50,000, or $80,000 to $100,000 for a joint return, are eligible for a smaller credit.

Lifetime Learning Tax Credit

The Lifetime Learning Tax Credit is intended for adults who want to go back to school as well as college juniors, seniors, or those looking to earn a graduate-degree. This tax credit is limited to 20% of the first $10,000 spent on education, meaning the highest credit one can receive is $2,000. It is not necessary to pursue a degree in order to receive the credit; a student must only be enrolled in a course for it to apply. Unlike the HOPE Scholarship Tax Credit which can be claimed per student, this credit can only be claimed per family. However, you can claim an unlimited number of years, meaning, you can keep going back to take classes, eventually claiming up to $2,000. The same income limits on the HOPE Scholarship Tax Credit also apply to the Lifetime Learning Tax Credit.

Taken together, the HOPE Scholarship and Lifetime Learning Tax Credits are excellent ways to help pay for school. For more in-depth information, check Publication 970 on the IRS’s website at www.irs.gov/publications/p970/index.html.