Hope Credit
The Hope Credit, or the Hope Scholarship Tax Credit, is a nonrefundable education tax credit offered to eligible American taxpayers. When the Hope Credit was expanded and renamed the American Opportunity Tax Credit, a portion of the tax credit also became refundable. The Hope Credit allows eligible students who have not yet finished four years of college to qualify for a $2,500 income tax credit. The other available credit is the Lifetime Learning Credit, which can be claimed after the Hope Credit has been exhausted.
What Is the Hope Credit?
The Hope Credit, or the Hope Scholarship Tax Credit, is a nonrefundable education tax credit offered to eligible American taxpayers. In particular, qualifying students who have yet to complete four years of postsecondary education can claim this tax credit.
The Hope and other lifetime learning credits were enacted to encourage higher education and provide a measure of tuition reimbursement for parents (or students) who are paying college tuition and fees.
The Basics of the Hope Credit
The Hope Credit is one of two nonrefundable education credits available for taxpayers. Recipients can take the Hope Credit for tuition and fees and other expenses such as books. Room and board, medical expenses, and insurance do not qualify for the Hope Credit. The student incurring the expenses can be either the taxpayer, spouse, or dependent.
The other available credit is the Lifetime Learning Credit, which can be claimed after the Hope Credit has been exhausted. As of 2009, the Hope Credit became part of the American Opportunity Tax Credit (AOTC). In 2018, the maximum Hope Credit was $2,500. Any individual who incurs qualifying educational expenses can claim an education credit. Qualifying educational expenses include tuition and fees. Parents who pay tuition and fees for their children can claim this type of credit on their tax returns, subject to certain income restrictions.
Do You Qualify for the Hope Credit?
The IRS considers a student qualified if they are enrolled at an accredited postsecondary institution at least part time in one academic year. That student must still be enrolled at the institution at the beginning of the tax year, taking courses toward a degree or another recognized educational qualification, and must not have been convicted of any felony drug offense by the end of the tax year.
Taxpayers can claim the credit for up to four years of postsecondary education to reduce the costs of tuition and other eligible expenses. According to the IRS, a qualified educational expense includes tuition paid to the school and expenses for books, supplies, and equipment that may have been bought from external sources. These expenses qualify if taxpayers use student loans to pay for them but not if they use scholarships, grants, or funds from a 529 savings plan.
Related terms:
Additional Child Tax Credit
The Additional Child Tax Credit was the refundable part of the Child Tax Credit. The refundable credit was revamped under the Tax Cuts and Jobs Act. read more
American Opportunity Tax Credit (AOTC)
The American Opportunity Tax Credit is a credit for expenses incurred in the first four years of post-secondary education. read more
American Recovery and Reinvestment Act (ARRA)
The American Recovery and Reinvestment Act of 2009 (ARRA) was a law passed by the U.S. Congress in response to the Great Recession of 2008. read more
Child and Dependent Care Credit
Child and dependent care credit is a nonrefundable tax credit for unreimbursed childcare expenses paid by working taxpayers. read more
Child Tax Credit
This $2,000-per-child credit covers children under 17; $1,400 is refundable. In 2021, it's $3,000 for under 18s ($3,600 under 6) and fully refundable. read more
Dependent
A dependent is a person who entitles a taxpayer to claim dependent-related tax benefits that reduce the amount of tax that the taxpayer owes. read more
Earned-Income Credit (EIC)
The earned-income credit (EIC) is a tax credit in the U.S. that benefits certain taxpayers who earn low incomes from work in a particular tax year. read more
Education Tax Credit
Education tax credits are available for taxpayers who pay qualified higher education expenses for eligible students, to offset certain education expenses. read more
Educator Expense Deduction
The educator expense deduction is a tax break for teachers and other education professionals for up to $250 in out-of-pocket expenses. read more
Foreign Tax Credit
The foreign tax credit is a nonrefundable tax credit for income taxes paid to a foreign government as a result of foreign income tax withholdings. read more