Education Credits

Education Credits - Availability for High Income Taxpayers

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Question or Topic

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The Question: What are the taxable income qualifications for education credits?

	The Answer

You can claim a Hope Credit for only two tax years for each eligible student. An eligible student can be you, your spouse, or your dependent for whom you claim an exemption. The maximum Hope Credit is $1,500 for each eligible student (100% of the first $1,000 of qualified tuition and related expenses, plus 50% of the next $1,000 of such expenses).

The Hope Credit is gradually reduced if your modified adjusted gross income is between $40,000 and $50,000 ($80,000 and $100,000 in the case of a joint return). The credit cannot be claimed if your modified AGI is $50,000 or more ($100,000 or more in the case of a joint return). You cannot claim the credit if you are married filing a separate return.

You are allowed a Lifetime Learning Credit of 20% of the first $5,000 you paid for qualified tuition and related expenses for all students in the family. The maximum amount of credit you can claim for 2001 is $1,000 (20% of $5,000).

The Lifetime Learning Credit is not based on the student's workload. It is allowed for one or more courses that the student takes at an eligible educational institution. The credit is not limited to students in the first two years of post–secondary education. Expenses for graduate–level degree work are eligible. There is no limit on the number of tax years for which the Lifetime Learning credit can be claimed for each student. The amount you can claim as a credit does not vary (i.e., increase) based on the number of students for whom you pay qualified expenses. However, that amount may be reduced based on your modified AGI. The credit is gradually reduced if your modified AGI is between $40,000 and $50,000 ($80,000 and $100,000 in the case of a joint return). You cannot claim the credit if you are married filing a separate return.

	Solutions

Solutions are dependent upon facts & circumstances, law and the objectives. These elements vary from one time to another, from one circumstance to another and from person or entity to another.

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