Tax Incentives

Below is a summary of higher education tax benefits for the 2008 tax year.

Hope Tax Credit allows a maximum tax credit subtracted from the tax amount the tax payer owes up to $1,800 (100% of the first $1,200 of qualified education expenses, and 50% of the next $1,200 of qualified education expenses). Qualified educational expenses include tuition and fees required for enrollment or attendance at an eligible postsecondary school. The credit is available per eligible student enrolled at least half time in an eligible program and school for the first two years of college. The amount of the credit depends on your family’s income, the amount of qualified education expenses paid out of pocket, and the number of eligible dependents in your family. Families with modified adjusted gross incomes below $116,000 (single filers below $58,000) are eligible. Married filers filing separately are not eligible for this credit.

Lifetime Learning Tax Credit allows a maximum tax credit subtracted from the tax amount the tax payer owes up to $2,000 per return (family based). It is available for an unlimited number of years. Qualified educational expenses include tuition and fees required for enrollment for a course at an eligible school. The course must be part of a postsecondary degree program or taken by the student to acquire or improve job skills. Families with modified adjusted gross incomes below $116,000 (single filers below $58,000) are eligible. Married filers filing separately are not eligible for this credit.

Tuition and Fees Tax Deduction can reduce your taxable income up to $4,000 per year for tax year 2008. This deduction can benefit a taxpayer if they do not qualify for the Hope Tax or Lifetime learning Tax Credit. Qualified educational expenses include tuition and fees required for enrollment or attendance at an eligible postsecondary school but do not include personal, living or family expenses such as room and board, insurance, medical expenses and transportation. The Tuition and Fees Tax Deduction is available for taxpayers with modified adjusted gross income below $80,000 for single filers and $160,000 for married taxpayers filing jointly. Married filers filing separately are not eligible for this credit.

Student Loan Interest Deduction can reduce your taxable income up to $2,500 for tax year 2008. The deduction is available for tax payers with a modified adjusted gross income less than $70,000 for single filers and $145,000 for married filers and gradually reduced for taxpayers with modified adjusted gross income between $55,000 and $70,000 for single filers and $115,000 and $145,000 for married taxpayers filing jointly. Married filers filing separately are not eligible for this credit.

Coverdell Education Savings Accounts (ESA) allow a current contribution maximum of $2,000 for each designated beneficiary under the age of 18 for 2008 to pay for qualified educational expenses. Qualified educational expenses that may be paid tax-free from this account include tuition and fees, books, supplies and equipment, special needs services and room and board for students registered at least half time at an eligible postsecondary school. Contributions are generally allowed for individuals with modified adjusted gross income less than $110,000 for single filers and $220,000 for married tax payers filing jointly. Contributions are not tax deductible but earnings and distributions are tax free when used for qualified educational expenses.

Qualified Tuition Programs (QTP) allow prepayment of a student’s qualified educational expenses at an eligible educational institution. Qualified educational expenses include tuition and fees, books, supplies and equipment, special needs services and room and board for students registered at least half time at an eligible postsecondary school. There are no income restrictions on the individuals contributing to the account. Distributions are tax free as long as they are equal to or less than the adjusted qualified educational expenses.

Tax Tips

Consult a tax advisor to determine your eligibility for tax incentives.
Columbia College Chicago will issue an annual 1098-T to assist with reporting the Hope Scholarship and Lifetime Learning tax credits on your tax return. Call 877.467.3821 or visit www.1098T.com for more information.
Scholarships and grants that exceed the cost of tuition, fees, books, and supplies are considered taxable income to the student by the IRS. It is the student’s responsibility to maintain records in order to determine potential tax liability.
Federal Work-Study earnings received during in-school sessions are not subject to FICA withholding but are subject to federal and state income taxes. You will be issued a W-2 by January 31st.

Additional Information