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Financial Aid > Guide to Financial Aid Revised 1/25/08

Understanding the Hope and Lifetime Learning Credits

What Is the Hope Credit?

The Hope Credit is a non-refundable tax credit, not a scholarship. You may be able to claim this credit for qualified tuition and related expenses of EACH student in the taxpayer's family if the student is:

  • Enrolled at least half time for at least one academic period beginning during the year
  • Enrolled in the first two years of post-secondary education
  • Enrolled in a program leading to an undergraduate degree or other recognized education credential
  • Has not claimed the Hope credit in more than one prior tax year
  • Free of any felony drug conviction

Characteristics of Hope Credit:

    • Maximum credit of $1,650 per eligible student
    • 100% of the first $1,100 in qualified tuition and related expenses, plus 50% of the next $1,100
    • Credit is reduced if modified adjusted gross income (MAGI) is: Between $47,000 & $57,000 ($94,000 & $114,000 if you file a joint return). If MAGI is above $57,000 ($114,000 for joint filers), the credit cannot be claimed.

What Is the Lifetime Learning Credit?

The Lifetime Learning Credit is a non-refundable tax credit. This credit has a broader scope than the Hope credit. This credit may be claimed for the qualified tuition and related expense of a taxpayer's family member who:

  • Is enrolled in any course as undergraduate, graduate, or post-graduate college and university courses or
  • Is enrolled for technical, remedial, and job skill improvement or
  • Is enrolled in one or more courses for an unlimited number of years or
  • Is not necessarily pursuing a degree or other recognized educational credential, but is taken to acquire or improve job skills.

Characteristic of Lifetime Learning Credit:

  • Maximum credit of $2,000 per return
  • Credit is reduced if modified adjusted gross income (MAGI) is:
    • Between $47,000 & $57,000 ($94,000 & $114,000 if you file a joint return). If MAGI is above $57,000 ($114,000 for joint filers), the credit cannot be claimed

What is the Tuition and Fees Deduction?

The tuition and fees deduction can reduce the amount of income subject to tax by up to $4,000.  You may be able to deduct qualified education expenses paid during the year. This deduction is taken as an adjustment to income.  You may claim the deduction if all three of the following requirements are met.

  • You pay qualified education expenses of higher education.
  • You pay the education expenses for an eligible student.
  • The eligible student is yourself, your spouse, or dependent for whom you claim an exemption on your tax return

You may take tuition and fees deduction if:

  • Modified adjusted gross income is $80,000 or less ($160,000 if filing a joint return).
  • Filing status is not married filing separately
  • A Hope or Lifetime learning credit was not claimed

Should one of the credits be claimed or use the deduction?

You can choose the one that will give you the lower tax.

What is the Student Loan Interest Deduction?

If your modified adjusted gross income is less than $70,000 ($140,000 for joint filers) there is a special deduction allowed for paying interest on a student loan used for higher education.  This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2007.

Where Is There Additional Information on the Hope and Lifetime Learning Credits, the Tuition and Fees Deduction, and the Student Loan Interest Deduction?

IRS Publication 970 (www.irs.gov/pub/irs-pdf/p970.pdf — Link opens in a new window)

What is the Michigan College Tuition & Fees Credit?

See the 2007 Michigan Schedule CT.  Generally 8% of tuition and fees paid during 2007 at an eligible institution up to $375 per student.

Important Information regarding your 1098-T for 2007:

Northwestern Michigan College reports Tuition and Related Expenses Billed in Box 2 of the 1098T.   This amount may represent an amount other than the amount actually paid in 2007.  As an example, Spring 2008 bills were mailed to registered students in December 2007.  The Billed amount is included in the 2007 1098-T even though it may not have been paid in 2007.

Special IRS note for 2007:

2007 IRS note - If you utilize form 8863 Education Credits in your 2007 IRS tax return, the IRS has announced that they cannot process those forms until Feb 11, 2008, due to the late Alternative Minimum Tax (AMT) patch enacted by Congress.  Please go to the IRS website (www.irs.gov) or talk to your tax preparer to get more information.

**You can now view your 1098-T tax form on the web at
www.nmc.edu/webregistration
with your student ID and PIN.
Click "Student Billing" and then "Tax Notifications."

If you have any questions, please call NMC's Cashier's Office at 231-995-1085.
This information is not intended as legal or tax advice.
The College is unable to provide individual tax advice.

 
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