Education Credits Table
:
| Benefit | Annual limit | Expenses that qualify |
Conditions | Max. income1 |
| Hope Credit | ||||
| Tax credit | Up to $1,500 per student for first 2 years of undergraduate | Tuition and fees | Must be enrolled at least part-time in a degree program. | $50,000; joint returns: $100,000 |
| Lifetime learning credit | ||||
| Tax credit | Up to $1,000 per family after second year of college | Tuition and fees | Applies to expenses paid for school attendance after June 30, 1998. | $50,000; joint returns: $100,000 |
| Education IRA | ||||
| Withdrawals are tax free | $500 contribution per child under 18 | Tuition and fees, books, supplies, room and board | Contributions not deductible; cannot contribute to qualified state tuition program or claim an education credit. Must withdraw assets at age 30. | $110,000; joint returns: $160,000 |
| Traditional and Roth IRAs | ||||
| No 10% penalty for early withdrawal | Amount of qualifying expenses | Tuition and fees, books, supplies, room and board | Must receive entire balance or begin receiving withdrawals by April 1 of year following year you reach age 70½. | NA |
| Interest paid on student loans | ||||
| Deduction from income | 1999: $1,500; 2000: $2,000; 2001: $2,500. | Tuition and fees, books, supplies, room and board, transportation | Applies to the first 60 months’ interest. Must be enrolled at least part time in a degree program. | $55,000; joint returns: $75,000 |
| Qualified state tuition programs | ||||
| Tax on earnings is deferred | None | Tuition and fees, books, supplies, room and board | Earnings are taxed to beneficiary when withdrawn. | None |
| U.S. Savings Bonds | ||||
| Interest is not taxed | Amount of qualifying expenses | Tuition, fees, payments to education IRAs and state tuition plans | Applies only to qualified series EE bonds issued after 1989 or series I bonds. | $68,100; joint returns: $109,650 |
| Employers’ Educational Assistance Program | ||||
| Employer benefits are excludable from income | $5,250 | Tuition and fees, books, supplies, room and board | Cannot also claim an education credit; for undergraduate work only. | None |
| Education as a miscellaneous itemized deduction | ||||
| Deduction from income | With other miscellaneous deductions, must exceed 2% of AGI | Tuition, fees, books, supplies. Some costs related to transportation, travel and research. | Must be work-related and undertaken to maintain or improve job skills. | None |
| Scholarships | ||||
| Generally tax free | NA | Tuition, fees, books, supplies related to course work | Amounts designated specifically for services rendered or to cover living expenses are taxable income. | None |
1- Denotes top of an income range in which the benefit is
first reduced then eliminated.
Sources