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IMPORTANT 2006 TAX CHANGESSpecial IRS instructions for taxpayer who want to claim the above-the-line tuition deduction. Congress belatedly reinstated the tuition and fees tax deduction in December retroactively (it had expired January 1, 2006).The IRS had already sent its paper forms to the printer before Congress acted, so there is no place on the form 1040 for the deduction. Further, IRS needs to reprogram its software (and so will the on-line and software providers presumably) to allow for the deduction, so the key piece of advice is that no returns claiming the tuition and fee deduction should be filed until early February. More information including instructions on how to fill out paper forms, is available at: www.irs.gov/newsroom/article/0,,id=165640,00.htmlNote: the above does not constituete official guidance. Please consult a tax professional regarding your particular tax situation. Tax Relief Act of 1997The Tax Relief Act of 1997 may provide you with an opportunity for tax savings through the Hope Scholarship Credit and the Lifetime Learning Tax Credit. These two tax credits are based on payments made for tuition and certain related educational costs.The Hope Scholarship Tax Credit enables a taxpayer to claim a tax credit of up to $1,500 per eligible student for the cost of qualified tuition and related expenses pertaining to the first two years of post secondary education. To be eligible, the student must be enrolled as a first or second year student in an undergraduate degree program, and must be enrolled at least half-time for at least one term during the tax year. The credit may be claimed for the qualified tuition and related expense of EACH eligible student in the taxpayer’s family (i.e. the taxpayer, the taxpayer’s spouse, or an eligible dependent). The credit is limited to 100 percent of the first $1,000 and 50 percent of the second $1,000 of qualified costs. The Hope Scholarship Credit is effective for qualified tuition and related expenses paid after December 31, 1997. The Lifetime Learning Credit allows a taxpayer to claim a tax credit for up to 20 percent of the first $5,000 of all other qualified tuition and related expense paid by the taxpayer during the tax year on behalf of the taxpayer, the taxpayer’s spouse or the taxpayer’s dependents. The Lifetime Learning credit is effective for educational expenses paid after June 30, 1998. The Hope Scholarship Credit and the Lifetime Learning Credit cannot be claimed for the same student during any taxable year. Certain income limitations apply to both tax credits. Loans applied to the student’s tuition account are considered eligible out-of-pocket payments for both tax credits. Details on the tax credits can be found on the enclosed fact sheet. This information is being provided as a service to the student population and is not intended as tax advice. You may wish to consult with a tax professional to discuss your personal situation or view the web site addresses listed on the fact sheet to gather further information. |
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