If you paid someone to care for your dependent under age 13 or your disabled dependent or spouse so that you could work or look for work, you may be able to claim the credit for child and dependent care expenses. For specific information on how to qualify for this credit refer to Tax Topic 602, Child and Dependent Care Credit, or Publication 503, Child and Dependent Care Expenses.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credits

The expenses for kindergarten do not qualify for the dependent care credit if the kindergarten is primarily educational in nature. Expenses for school in the first grade or higher do not qualify for the credit. However, you can count the part of the expenses of sending your child to school that is for your child's care if it can be separated from the expenses of education. For example, you may count the cost of an after school care program even though the school tuition does not qualify.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

That depends on the amount you elected to have contributed to the flexible spending arrangement. The exclusion from income for employer-provided benefits can be as high as $5,000, while the credit for dependent care expenses is based on annual dollar limits of $3,000 for one person and $6,000 for two or more persons. You must reduce those dollar limits by the amount of excludible dependent care benefits. If you had expenses that you paid yourself and the employer provided benefits were less than the applicable dollar limit, you can also claim the credit. Complete Part III of either Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers, to determine the excluded benefits and whether you can claim the credit.

Change. The applicable percentage and allowable employment-related expenses increase beginning in 2003. The maximum applicable percentage is 35 percent and the allowable employment-related expenses are $3,000 for one qualifying child and $6,000 for two or more qualifying children (Code Sec. 21, as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001). Thus, the maximum credit is $1,050 for one qualifying child and $2,100 for two or more qualifying children.

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credits

If the omission was simply a clerical oversight, you may not claim the child care credit. If the flexible spending account was an eligible plan under Internal Revenue Code Section 125, the amount of the salary reduction that was contributed to your account should appear in box 10 of your Form W-2. Request a corrected Form W-2 from your employer.

You may claim the child care credit if the contribution to your flexible spending account was less than your annual dollar limitation for eligible expenses ($3,000 for one person, or $6,000 for two or more persons). Even if you cannot claim the credit, you must complete Part III of either Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers, to exclude your employer provided benefits from your income. If the amount you paid into a flexible spending account reduced your wages in box 1 of Form W-2, it is considered an employer provided benefit.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

The actual mechanism for this type of plan is an agreement to voluntarily reduce your salary in return for an employer-provided fringe benefit. These plans must be set up this way because you have a choice of whether to receive the cash wages or the benefits, which would make the benefit taxable to you. Therefore, the benefits are actually employer provided or funded. You are receiving a tax benefit because you are not paying taxes on the money that is set aside.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

You must complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses , (or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers) to claim the exclusion of the benefits from income even if you cannot claim the credit. Enter your total employer-provided dependent care benefits on line 12 (this amount should appear in box 10 of your Form W-2) and your qualified expenses on line 15. The last six lines of Part III will determine whether you can also take the credit and what your dollar limit is on qualified expenses. Also Complete Part I, Persons or Organizations Who Provided the Care.

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and Dependent Care Credits

Generally, yes. When you complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, which you must do to claim excluded benefits, line 17 asks you to enter the smallest of:

If you had a loss from self-employment and no other earned income, your earned income would be $0, unless you can use one of the optional methods on Form 1040, Schedule SE (PDF), Self-Employment Tax. That would mean that the amount in box 10 of your wife's Form W-2 would have to be included in income. (For more information on the optional methods of computing self-employment tax, refer to Publication 533, Self-Employment Tax, or Instructions for Form 1040, Schedule SE, Self-Employment Tax.

The income considered to be earned by a spouse who is a full-time student or who is incapable of self-care is $250 per month if there's one qualifying individual in the household, and $500 a month if there are two or more qualifying individuals. However, this income is deemed to be earned only by one spouse for any given month. (Code Sec. 21 (d) (2)).

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and Dependent Care Credits
• Code Section 21 (d) (2)

Yes. If the flexible spending account is providing you with a dependent care benefit, then it should be reported in box 10 of your Form W-2. These accounts are funded through a salary reduction, so the contribution to the account is considered an employer contribution. When you receive a dependent care benefit from your employer, you must complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, (or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers) to see if the benefits are fully excluded from income. You may be able to also claim a credit for child and dependent care expenses if the excluded benefits are less than the dollar limit on qualified expenses for the credit.

References:

• Publication 503, Child and Dependent Care Expenses
• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credits

The Child and Dependent Care Credit can only be claimed by the custodial parent. This is true even if you cannot claim the child's exemption because the divorce decree allows the other parent to claim the exemption, or you have released the exemption on Form 8332. Refer to Publication 503, Child and Dependent Care Expenses, for a complete discussion.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

Yes, assuming that you already meet the other requirements to claim the child care credit, but are missing the required ID number of the provider, you can still claim the credit by demonstrating "due diligence" in attempting to secure the needed information.

When the care provider refuses to give the identifying information, the taxpayer can still claim the credit and is instructed to provide whatever information is available about the provider (such as name and address) on the form used to claim the credit Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns calling for the missing information. He/she would write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the necessary information.

References:

• Form W-10 (PDF), Dependent Care Provider's Identification and Certification
• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

As a care provider, you are required to give your correct name, address, and Taxpayer Identification Number (TIN) to customers who paid for child care services during the year. A valid TIN can be the Employer Identification Number (EIN) of the business or the social security number of a sole proprietor. Form W-10 (PDF), Dependent Care Provider's Identification and Certification, or a similar statement may be used for such purposes.

A care provider who does not give the customer a correct TIN is subject to a penalty of $50 for each failure unless the failure is due to reasonable cause and not willful neglect. The failure of a customer to pay a bill in full would not normally constitute reasonable cause. The penalty does not apply to qualified tax exempt care providers.

When the care provider refuses to give the identifying information, the taxpayer can still claim the credit and is instructed to provide whatever information is available about the provider (such as name and address) on the form used to claim the credit Form 2441 (PDF), Child and Dependent Care Expenses, or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns calling for the missing information. He/she would write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the necessary information.

References:

• Form W-10 (PDF), Dependent Care Provider's Identification and Certification
• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses.
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

The up front fee may qualify as a child care expense if it is an expense you must pay in order to obtain care. However, you can only count it toward the credit proportionately over the duration of the agreement to employ the au pair. The $150 per week as well as other work related expenses may qualify as a child and dependent care expense. Please refer to Publication 503, Child and Dependent Care Expenses for a full discussion.

If your au pair works in your home, you may also be responsible for employment taxes. Refer to Publication 926, Household Employers Tax Guide, for more information.

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441, Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Publication 926, Household Employers Tax Guide
• Tax Topic 602, Child and dependent care credit

The cost of day camp, including a camp that specializes in a particular activity such as soccer or computers, may qualify as child care expense, if your main purpose in sending your child is to assure the child's well-being and protection.

References:

• Form 2441 (PDF), Child and Dependent Care Expenses
• Instructions for Form 2441 Child and Dependent Care Expenses
• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

You may have qualified child care expenses if the family member baby-sitting is not your dependent or your child under age 19 and you meet all the tests to claim the Child and Dependent Care Credit. Your family member will be responsible for paying taxes on the money earned and will be considered to be self-employed.

References:

• Publication 503, Child and Dependent Care Expenses
• Publication 533, Self-Employment Tax
• Tax Topic 602, Child and dependent care credit

Elderly day care payments may qualify as Child and Dependent Care Expenses. In order to be a qualifying person, the person receiving the elderly day care must be either your spouse who was physically or mentally not able to care for himself or your dependent who was physically not able to care for himself and for whom you can claim an exemption (or could claim an exemption except the person had $3,050 or more of gross income in the year 2003) (for 2004, gross income of $3,050 or more). All of the other criteria for claiming the Child and Dependent Care Credit must also be met.

References:

• Publication 503, Child and Dependent Care Expenses
• Tax Topic 602, Child and dependent care credit

The custodial parent cannot claim the Child Tax Credit for a child in the tax year that the noncustodial parent takes the exemption for that child. Please refer to the 1040 Instruction Booklet index for the Child Tax Credit. The referenced pages will explain who qualifies for this credit and how to calculate it.

References:

• Publication 17, Your Federal Income Tax
• Tax Topic 606, Child tax credits

Yes. The Child Tax Credit can only be claimed by the parent claiming the exemption. In this case the noncustodial parent would qualify for the dependency exemption and therefore the child tax credit. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for Child Tax Credit. The referenced pages will explain who qualifies for this credit, and how to calculate it.

References:

• Instructions for Form 1040
• Instructions for Form 1040A
• Publication 17, Your Federal Income Tax
• Tax Topic 606, Child tax credits

The Child Tax Credit and the Child and Dependent Care Credit can both be claimed on the same return. They can be claimed on either Form 1040 (PDF), U.S. Individual Income Tax Return, or Form 1040A (PDF), U.S. Individual Income Tax Return. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it. Publication 503, Child and Dependent Care Expenses, has more information for the child care credit.

References:

• Instructions for Form 1040
• Instructions for Form 1040A
• Tax Topic 606, Child tax credits

Yes. You will need to complete Form 8812 (PDF), Additional Child Tax Credit, and attach it to your Form 1040 or 1040A. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it.

References:

• Instructions for Form 1040
• Instructions for Form 1040A
• Publication 972, Child Tax Credit
• Tax Topic 606, Child tax credits

Your grandchild under the age of 17 who is your dependent and is a U.S. citizen or resident alien is a qualifying child for the child tax credit. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it.

References:

• Instructions for Form 1040
• Instructions for Form 1040A
• Tax Topic 606, Child tax credits

Yes, with an individual tax identification number (ITIN), you can claim the Child Tax Credit if you otherwise qualify. The Child Tax Credit can only be claimed by the parent claiming the child as a dependent.

Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it.

References:

• Instructions for Form 1040
• Instructions for Form 1040A
• Tax Topic 606, Child tax credits

Yes, you may attach a copy of the child's birth certificate and enter "DIED" in column 2 of line 6c. You will also need to put a check mark in column 4 of line 6c. Please refer to the Instructions for Form 1040 or the Instructions for Form 1040A index for the Child Tax Credit. The referenced pages will explain who qualifies for the Child Tax Credit, and how to calculate it.

References:

• Instructions for Form 1040
• Instructions for Form 1040A
• Tax Topic 606, Child tax credits

Generally, if you were age 65 or older or disabled and your income and nontaxable social security and other nontaxable pension are below specified amounts, you may be able to take this credit. For more details, refer to Tax Topic 603, Credit for the Elderly or the Disabled, or Publication 524, Credit for the Elderly or the Disabled.

References:

• Publication 524, Credit for the Elderly or the Disabled
• Tax Topic 603, Creditor for the elderly or the disabled

There are two credits available, the Hope Scholarship Credit and the Lifetime Learning Credit.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education Credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Unlike the Hope Credit:

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

You can claim only one of the credits for each eligible student per tax year.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No, you cannot take both credits in one year for the same student. However, eligibility for the Hope Credit depends on your status at the beginning of the calendar year. If you are classified as a second-semester sophomore during the spring semester and as a first-semester junior during the fall semester of that same year, the qualified expenses you pay for the fall semester may be taken into account for the Hope Credit because you had not completed the first 2 years of your secondary education when the year began.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Ref (p. 35 of 8/28/01 S 25A draft final regs (ex 3); 25A (b) (2) (c) )

The amount of the credit is determined by the amount you pay for qualified tuition and related expenses paid for each eligible student and the amount of your modified adjusted gross income (AGI).

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other postsecondary educational institution eligible to participate in the student aid programs administered by the Department of Education.

Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No. Expenses paid to attend high school do not qualify for the education credits because a high school is not an eligible educational institution. An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit making) postsecondary institutions.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Expenses paid for college courses taken while attending high school may qualify for the Hope Scholarship Credit or for the Lifetime Learning Credit if the student otherwise meets the qualifications for claiming either of the credits.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

The educational institution should be able to tell you if it is an eligible educational institution.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Yes. One qualification to claim the Hope credit is that the student be enrolled in an eligible educational institution (in a program) at least half time that leads to a degree certificate or other recognized educational credential for no less than one academic period beginning in the taxable year.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No, an education credit is claimed in the year in which the expenses are paid, not in the year in which money is set aside in a college savings plan. You may want to consider setting up an Educational IRA. For more information, refer to Publication 970, Tax Benefits for Higher Education.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No. Neither the Hope Credit nor the Lifetime Learning Credit can be claimed if the individual is married but filed a separate return.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

The education credits are claimed on Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), which is attached to your Form 1040 or Form 1040A.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No. You cannot claim a credit for the amount of higher education expenses paid for by tax-free scholarships.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Tax Topic 421, Scholarship and fellowship grants
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

You must reduce the qualified expenses by the amount of any tax-free educational assistance. Do not reduce the qualified expenses by amounts paid with the student's earnings, loans, gifts, inheritances, and personal savings. Also, do not reduce the qualified expenses by any scholarship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualified tuition and related expenses.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Tax Topic 513, Educational expenses
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

You can download this form and the instructions from the Forms & Pubs section of our web site. You may also call 1-800-829-3676.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

The information on Form 1098-T may help you determine whether you can claim an education tax credit.

References:

• Tax Topic 605, Education Credits
• Publication 970, Tax Benefits for Higher Education
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

An eligible educational institution that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st.

References:

• Tax Topic 605, Educational Credits
• Publication 970, Tax Benefits for Higher Education
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

The following information should be included on the form.

References:

• Tax Topic 605, Education Credits
• Publication 970, Tax Benefits for Higher Education
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

An eligible educational institution (such as a college or university) that receives payment of qualified tuition and related expenses generally must issue Form 1098-T, Tuition Payments Statement, to each student by January 31st. You may be able to claim a credit for these expenses by completing Form 8863 (PDF), Education Credits, and attaching it to your Form 1040.

References:

• Tax Topic 605, Education Credits
• Publication 970, Tax Benefits for Higher Education
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No, there is no requirement that you receive this form before you can claim these credits.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

If you take out a loan to pay higher education expenses, those expenses may quality for the credit if you will be required to pay back the loan. The credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

The rule for a school loan is the same as the rule for a government subsidized loan. Even though the loan proceeds are not income to you, expenses paid from the loan proceeds may qualify for the Hope or Lifetime Learning Credit if the loan must be repaid. The education credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

To claim the credit, you will need to file Form 1040X (PDF), Amended U.S. Individual Income Tax Return, and attach Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits).

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No, you must use either Form 1040A or Form 1040 along with Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), to claim the credit.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Yes, you must claim your child as a dependent to take either of the education credits. If you claim an exemption for your child on your tax return, only you can claim the credit.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education Credits
• Tax Topic 354, Dependents
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No. The divorced father cannot claim an educational credit because he does not claim the child as a dependent. The ex-wife, however, can claim an educational credit because she is claiming the child as a dependent and, under a special rule, is treated as having paid the child's tuition. The child cannot claim the credit because he is being claimed as a dependent on his mother's return.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Tax Topic 354, Dependents
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

It is a nonrefundable tax credit for a student's first 2 years of undergraduate education.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Generally, you can claim the Hope credit if all three of the following requirements are met.

You cannot claim the Hope credit if any of the following apply.

In general, qualified tuition and related expenses are tuition and fees required for enrollment or attendance at an eligible educational instititution

Eligible education institution . An eligible educational institution is an college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit-making ) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.

To claim the Hope credit, the student for whom you pay qualified tuition and related expenses must be an eligible student. This is a student who meets all of the following requirements.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

The maximum credit per student is $1,500 (100 percent of the first $1,000 of qualified tuition and related expenses, plus 50 percent of the next $1,000 of such expenses).

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

The Hope Credit may be claimed for no more than 2 taxable years and may not be claimed if at the beginning of the taxable year the student has completed the first 2 years of postsecondary education at an eligible educational institution. If the student has not claimed a Hope Credit for more than 1 year and if the educational institution at which the student is enrolled ranks the student as being less than a first-semester junior at the beginning of the year, the student may be eligible to claim the Hope Credit.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Relatively few postsecondary institutions located outside of the United States participate in a student aid program administered by the Department of Education. Therefore, tuition paid to a foreign university usually does not qualify for either of the education credits. The educational institution should be able to tell you if it is an eligible educational institution.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 513, Educational expenses
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

You should keep all your canceled checks that were used to pay for the qualifying expenses and any other documentation showing the amount of tuition and fees paid.

References:

• Publication 552 , Record Keeping For Individuals
• Tax Topic 605, Education Credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No. Since you have already completed your first 2 years of postsecondary education, the courses that you are now taking do not qualify for the Hope Credit. However, you may be eligible for the Lifetime Learning Credit.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

You can only claim the Hope Credit if at the beginning of the year, you are not classified as having completed the first 2 years of postsecondary education.

For example, if you attended classes for only one or two semesters, you would still be in your first 2 years of post secondary school. Generally if you attended five or more semesters, you would not be considered in your first 2 years of post secondary school even if you have not attained your associate's degree.

If you don't qualify for the Hope Credit, you may qualify for the Lifetime Learning Credit.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

A nonrefundable tax credit up to $2,000 per family for all undergraduate and graduate level education. Figured by taking 20% of the first $10,000 of qualified educational expenses paid.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Generally, you can claim the lifetime learning credit if all three of the following requirements are met.

The lifetime learning credit is based on qualified tuition and related expenses you pay for yourself, your spouse, or a dependent for who you can claim an exemption on your tax return. Generally, the credit is allowed for qualified tuition and related expenses paid in 2003 for an academic period beginning in 2003 or in the first 3 months of 2004.

For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution.

An eligible educational institution is an college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.

You cannot claim the lifetime learning credit if any of the following apply.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

If a student is required to pay a comprehensive fee to an eligible educational institution that includes charges for tuition, fees, and personal expenses, the portion of the comprehensive fee allocable to personal expenses is not eligible for the credit. The allocation must be made by the institution using a reasonable method.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

Both the Hope Credit and the Lifetime Learning Credit are nonrefundable credits. This means that the credits may reduce your federal income tax liability down to zero. However, if you do not owe any tax, the credits will not result in a refund.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

College courses taken while attending high school may qualify for the Hope Scholarship Credit or for the Lifetime Learning Credit if the student meets the qualifications for claiming either of the credits.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

If you claim an education credit, keep Form 1098-T with your tax records. The information on the form will not be used to figure the amount of your credit. Instead, use Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits), to calculate your credit.

References:

• Tax Topic 605, Educational credits
• Publication 970, Tax Benefits for Higher Education
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. However, if you are married and choose to file a joint return with a U.S. citizen or resident spouse, you may be eligible for the Hope or Lifetime Learning Credit.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No, payments on your student loans do not qualify for the Lifetime Learning Credit. However, interest on student loans may be deductible for Federal income tax purposes if you meet certain conditions. For more information, refer to Publication 970, Tax Benefits for Higher Education.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

No, if your parents claim you as a dependent, you cannot claim either of the education credits. However, any qualifying tuition payments that you made can be claimed by your parents as paid by themselves and may qualify them for the Hope or Lifetime Learning Credit.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits
• Tax Topic 354, Dependents
• Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)

You can not deduct educational expenses and claim a credit for the same expenses. You must choose one or the other.

References:

• Publication 970, Tax Benefits for Higher Education
• Publication 508, Tax Benefits for Work-Related Education
• Tax Topic 513, Educational expenses
• Form 8863 (PDF), Education Credit (Hope and Lifetime Learning Credits)

The amount included as taxable income is eligible for the Lifetime Learning Credit. If your tuition is paid by your employer but is not included in your taxable income, then the amount of the tuition is ineligible for the education credit. This is because double tax benefits are not allowed.

References:

• Publication 508, Tax Benefits for Work-Related Education
• Tax Topic 513, Educational expenses

In general, an educational credit is not available for expenses incurred to pay for books. The Federal Income Tax Regulations provide an example that may be helpful: First-year students at College W are required to obtain books and other reading materials used in its mandatory first-year curriculum. The books and other reading materials are not required to be purchased from College W and may be borrowed from other students or purchased from off-campus bookstores, as well as from College W's bookstore. College W bills students for any books and materials purchased from College W's bookstore. The fee that College W charges for the first-year books and materials purchased at its bookstore is not a qualified tuition and related expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.

References:

• Publication 970, Tax Benefits for Higher Education
• Tax Topic 605, Education credits

The work opportunity credit provides an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. The credit can be as much as 40% of the "qualified first year wages" you pay to individuals who begin work for you before January 1, 2004. The credit can be claimed by filing Form 5884 (PDF), Work Opportunity Credit.

An individual is a member of a targeted group if he or she is a:

An individual is not considered a member of a targeted group unless your state employment security agency certifies him or her as a member. This certification requirement can be satisfied in either of two ways:

You must receive the certification before claiming the credit.

Refer to Tax Topic 750, Employer Tax Information, and Tax Info for Business, on this site for other employer information.

References:

• Form 5884 (PDF), Work Opportunity Credit
• Form 8850 (PDF), Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits
• Tax Topic 750, Employer Tax Information

On July 25, 2003, the IRS began issuing advance payment checks to about 25 million taxpayers who claimed the Child Tax Credit on their 2002 tax return. The payment is an advance refund of the expanded Child Tax Credit for the 2003 tax year. This credit increased to $1,000 per eligible child from $600 per child for the 2002 tax year. Taxpayers were able to get an advance payment of up to $400 per eligible child they claimed on their 2002 return.

The IRS notified all eligible taxpayers before the checks were sent. Taxpayers did not have to do anything. We were using your 2002 data to automatically figure whether you were due an advance payment check and if so, how much.

Generally, you were eligible to get the check if you claimed the Child Tax Credit on your 2002 tax return and your qualifying child was born after 1986. If you did not get a check and think that you are eligible for the credit, take the entire amount when you file your 2003 return.

If you did not get a check, you can claim up to $1,000 for each eligible child on your 2003 federal income tax return. Notify the U.S. Post Office of your address change.

Assuming that your income and number of qualifying children remain the same, your 2003 refund should not be smaller than your 2002 refund because of your advance payment. The law simply gave you this increase rather than have you wait until you filed your 2003 return in 2004. You just subtract the amount of your advance payment check from the $1,000 per-child total on your 2003 return.

No. It's part of the tax cut the new law gives you for 2003.

Visit the IRS website at irs.gov. Click on the "Your 2003 Advance Child Tax Refund." You will have to provide your social security number, the number of exemptions you claimed on your 2002 return, and the amount of your 2002 refund. Or call (800) 829-1040 and select the Your Advance Child Tax Refund topic.