1098-T Background Information

The Taxpayer Relief Act of 1997 (TRA97) established two new education tax credits: the Hope Credit for students who enrolled in one of the first two years of postsecondary education and are carrying at least a half-time workload while pursuing an undergraduate degree, certificate, or other recognized credential; and, the Lifetime Learning Credits for students who take one or more classes from a college or university to pursue an undergraduate or graduate degree, certificate, other recognized credential, or to acquire or improve job skills.

If the student listed is claimed as a dependent for federal income tax purposes, the student cannot claim either credit; however, the taxpayer who claims the student as a dependent may be eligible.

Amount of Hope Credit: 100 percent of the first $1,000 in qualified education expenses paid, and 50 percent of the next $1,000. The maximum amount that can be claimed for qualified education expenses paid on or after January 1, 2000 through and including December 31, 2000 is $1,500, or the amount of tax liability, whichever is less.

Amount of Lifetime Learning Credit: 20 percent of the first $5,000 in qualified education expenses paid, and 50 percent of the next $1,000. The maximum amount that can be claimed for qualified education expenses paid on or after January 1, 2000 through and including December 31, 2000 is $1,500, or the amount of tax liability, whichever is less.

To claim either credit, use IRS Form 8863, Education Credits.

Additional requirements and conditions apply, including income ceilings on eligibility and possible reductions to the amount of qualified education expenses that can be claimed. For information about these credits, see IRS Publication 970: Tax Benefits for Higher Education; IRS Announcement 97-60: Consumer Guidance on Education Tax Incentives; and IRS Publication 520: Scholarships and Fellowships. These documents, as well as IRS Form 8863, are available at www.irs.treas.gov or by calling the IRS at 1-800-829-1040. Additional instructions from your school, along with this 1098-T, IRS Form 8863, and general information on TRA97 are also available at www.1098-T.com.