| Publication 970 |
2001 Tax Year |
How Is the Credit Figured?
The amount of the Hope credit is the sum of:
- 100% of the first $1,000 of qualified tuition and related expenses you paid for each eligible student, and
- 50% of the next $1,000 of qualified tuition and related expenses you paid for each eligible student.
The maximum amount of Hope credit you can claim in 2001 is $1,500 times the number of eligible students. You can claim the full $1,500 for each
eligible student for whom you paid at least $2,000 of qualified expenses. However, the credit may be reduced based on your modified adjusted gross
income. See Does the Amount of Your Income Affect the Amount of Your Credit, later.
Example 1.
Jon and Karen are married and file a joint tax return. For 2001, they claim an exemption for their dependent daughter on their tax return. Their
modified adjusted gross income is $70,000. Their daughter is in her sophomore (second) year of studies at the local university. Jon and Karen pay
qualified tuition and related expenses of $4,300 in 2001.
Jon and Karen, their daughter, and the local university meet all of the requirements for the Hope credit. Jon and Karen can claim a $1,500 Hope
credit in 2001. This is 100% of the first $1,000 of qualified tuition and related expenses, plus 50% of the next $1,000.
Does the Amount of Your Income Affect the Amount of Your Credit?
The amount of your Hope credit is phased out (gradually reduced) if your modified adjusted gross income is between $40,000 and $50,000 ($80,000 and
$100,000 if you file a joint return). You cannot claim a Hope credit if your modified adjusted gross income is $50,000 or more ($100,000 or more if
you file a joint return).
The phaseout, if any, can be figured in Part III of Form 8863 or as shown in Example 2.
Example 2.
The information is the same as in Example 1 except that Jon and Karen have a modified adjusted gross income of $88,000.
They figure the total tentative Hope credit (100% of the first $1,000 of qualified expenses, plus 50% of the next $1,000 of qualified expenses). As
shown in Example 1 above, the result is a $1,500 total tentative credit.
To figure their allowable credit, they multiply the tentative credit ($1,500) by a fraction. Because they are filing a joint return, the numerator
of the fraction is $100,000 minus their modified adjusted gross income and the denominator is $20,000. The result is the amount of their Hope credit.
| |
$1,500 |
× |
$100,000 - $88,000 |
= |
$900 |
|
| |
| | $20,000 |
| | |
Modified adjusted gross income.
For most taxpayers, modified adjusted gross income (MAGI) is adjusted gross income (AGI) as figured on their federal income tax return.
MAGI when using Form 1040A.
If you file Form 1040A, your MAGI is the AGI on line 19 of that form.
MAGI when using Form 1040.
If you file Form 1040, your MAGI is the AGI on line 33 of that form, modified by adding back any:
- Foreign earned income exclusion,
- Foreign housing exclusion,
- Exclusion of income for bona fide residents of American Samoa, and
- Exclusion of income from Puerto Rico.
Worksheet 1-1, can be used to figure your MAGI.
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