There are many new tax benefits for adults who want to return to school and for parents
who are sending or planning to send their children to college. These tax credits
are as a direct result of the balanced budget signed into law in August, 1997.
Scholarship Tax Credit
The "HOPE Scholarship" tax credit helps make the first two years of
higher education available to everyone. Under the HOPE program, students will receive a 100%
tax credit for the first $1,000 of tuition and required fees and a 50% credit on
the second $1,000. This credit is available for tuition and required fees once grants, scholarships, and other tax-free educational assistance
have been subtracted from the total. Contact your child's financial aid
department for more information on the HOPE scholarship tax credit.
Lifetime Learning Tax Credit
This tax credit is intended for adults who are going back to school. Under
this program you will receive a 20%
tax credit for the first $5,000 of tuition and required fees paid each year
through 2002, and for the first $10,000 after that. The Lifetime Learning tax credit is available for
tuition and required fees after grants, scholarships, and other tax-free
educational assistance have been subtracted out.
Taxpayers may withdraw funds from an IRA, without
penalty, for their own higher education expenses or those of their spouse,
child, or grandchildren. For each child under age 18, families
may deposit $500 per year into an Education IRA in the child's name. Earnings in
the Education IRA will accumulate tax-free. You won't have to pay taxes on the
interest if the money is withdrawn for higher education purposes.
Child Tax Credit
If you have more than one child, the Child Tax Credit is available to you. For each
of your children under age 17, you may be able to subtract up to $500 from your
federal income tax
More Tax Info
You know taxes have got to be one of the most complicated things out there.
Contact a certified public accountant for a more complete explanation of the tax
credits available to you.