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Higher Education in Maryland

Federal Tuition Tax Credits*

The Hope and Lifetime Learning Tax Credits
If you're paying for your own or your dependent student's college education, there are two federal tax credits available for you - the Hope and Lifetime Learning credits.

What's a tax credit
A credit is subtracted directly from your federal income tax on a dollar-for-dollar basis.  This credit saves you more money than a deduction, which you subtract from your income before you calculate your tax and which yields much less than dollar-for-dollar savings.

Who gets to claim the credit?
If someone claims the student as a dependent for tax purposes, that student, not the student, may receive the tax credit, even if the student files a tax return.  Otherwise, only the student may receive the credit.

What's the difference between the credits?
The HOPE credit can be claimed for each of the first two-years of college or vocational school for classes that lead to a degree or recognized certificate.  The student must be enrolled at least half time to qualify for the HOPE credit.  The Lifetime Learning credit is available for any postsecondary education, including graduate and professional school, and unlike the HOPE credit, credit is available for any postsecondary education, including graduate and professional school, and unlike the HOPE credit, there is no minimum enrollment.  If you qualify for both credits, it will usually be to your advantage to claim the HOPE credit.

What college costs qualify?
Qualified expenses include tuition and required fees, minus any grants and scholarships that are received tax-free.  Expenses for books and supplies are not included unless they are paid to the institution as a condition of enrollment.  The costs of room and board, insurance, transportation, and medical fees (including health fees) are not qualified expenses, even if required for enrollment.

What the Hope Tax Credit is worth:
The amount of credit equals 100% of the first $1,000 of qualified expenses plus 50% of the second $1,000, for a maximum of $1,500.

What the Lifetime Learning Tax Credit is worth:
Currently, the credit will be 20% of the first $10,000 postsecondary tuition and fees paid each year, for a maximum of $2,000.

Is there an income limit?
Single tax filers with up to $42,999 of modified adjusted gross income (MAGI) and joint tax filers with up to $84,999 of MAGI qualify for the tax credit.  It is gradually phased out for single filers in the $43,000 - $53,000 range and for joint filers in the $87,000 - $107,000 range, and it is not available for those whose income exceeds the upper limit of those ranges.

It's easy to claim the credit!

  • The college will send the student IRS Form 1098-T Tuition Payments Statement, which will report the tuition and related expenses paid for the student.
  • The person claiming the credit needs to fill out IRS Form 8863 and attach the form to his or her federal tax return.  You can call (800)829-3676 to order the form.  It is a worksheet that will help to calculate the amount of HOPE or Lifetime Learning credit that will be claimed on the return.
  • Please refer to IRS Publications 970 - Tax Benefits for Education for additional information.

* Source:  Department of Education

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