How is the amount of the Hope or Lifetime Learning Credit determined?

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).

If tuition was paid by a government subsidized loan, can I still take the Hope or Lifetime Learning Credit?

If you take out a loan to pay higher education expenses, those expenses may qualify 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.

Who can claim the Hope Credit?

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

You pay qualified tuition and related expenses of higher education.

You pay the tuition and related expenses for an eligible student.

The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.

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

Your filing status is married separately.

You are listed as a dependent in the Exemptions section on another person's tax return (such as your parents'). See Who Can Claim a Dependent's Expenses, later.

Your modified adjusted gross income is $52,000 or more ($105,000 or more in the case of a joint return). Modified adjusted gross income is explained later under Does the Amount of Your Income Affect the Amount of Your Credit.

You (or your spouse) were a nonresident alien for any part of 2004 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. More information on nonresident alien can be found in Publication 519, U.S. Tax Guide for Aliens.

You claim the Lifetime Learning Credit for the same student in 2002.

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 post-secondary 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.

Did not have expenses that were used to figure a Hope Credit in any 2 earlier tax years.

Had not completed the first 2 years of postsecondary education (generally, the freshman and sophomore years of college) before 2004.

Was enrolled at least half-time in a program that leads to a degree, certificate, or other recognized educational credential for at least one academic period beginning in 2004.

Was free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of 2004.