GW Tax DepartmentThe George Washington University

Education Credits

The cost of tuition and other "qualified expenses" may be used as a credit against income tax due from the students or their parents. A credit is a dollar for dollar reduction against tax due and it is available whether or not you itemize deductions.

Two credits may be available to students or their parents:

For complete information regarding these credits, please see IRS Publication 970, Tax Benefits for Higher Education (PDF).

Some Rules Apply to Both Credits

  1. Expenses must be for qualified educational expenses. This includes tuition, required fees and course related books and equipment. (However, books and equipment are qualified educational expenses only if paid to the University. For this purpose, the GW Bookstore is not part of the University.) Qualified expenses do not include room and board, insurance, transportation and personal expenses.
  2. It must be paid to an eligible educational institution, which includes virtually all accredited, public, nonprofit, and proprietary post-secondary institutions. George Washington University is an eligible institution.
  3. The credits are available even if loans or gifts pay for the expenses. They are available for the tax year in which the expenses are incurred rather than the year in which the loan or gift is obtained (or repaid in the case of a loan).
  4. The credits are not available if the tuition, etc. was paid for with tax free funds such as scholarships, Pell grants, employer-provided educational assistance, or Veterans educational assistance.
  5. You cannot claim either credit if your income exceeds $53,000 (filing single) or $105,000 (filing a joint return).
  6. The credits are not available if you or your spouse were a nonresident alien for any part of the tax year, unless the nonresident alien elected to be treated as a resident alien.
  7. They cannot be claimed by two people, i.e., if you are claimed as a dependent on your parent's return, only your parents may claim the credit.
  8. Form 8863 is used for both credits.
  9. The eligible institution will issue, to the student, a Form 1098-T, providing the information necessary for the student (or parent) to claim either credit. The 1098-T should be retained with the taxpayer's records - it is not intended as an attachment to the Form 8863 or Form 1040.
  10. The credit is non-refundable, meaning that you must have tax due before you can claim the credit.

Hope Credit

An eligible student for the Hope credit is a student who has not completed the first 2 years of post-secondary education at the beginning of the tax year (generally, the freshmen and sophomore years), and did not have expenses that were used to figure a Hope credit in any 2 earlier years.

The student must be in a program that leads to a degree, certificate, or other recognized educational credential, for at least one academic period beginning in 2005.

The student did not have any federal or state felony conviction for possessing a controlled substance as of the end of 2005.

The student must be enrolled for at least half of the normal full-time workload.

The amount of the credit is 100% of the first $1,000 plus 50% of the next $1,000 of qualified expenses. Thus, the maximum amount of the credit is $1,500 for each eligible student, and the maximum number of time it could be claimed is two for each student.

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is different in several ways.

The LLC is not based on the student's workload. It is allowed for one or more courses.

The LLC is not limited to students in their first two years.

Expenses for graduate work are eligible.

There is no limit on the number of years the credit can be claimed.

The amount of the LLC is 20% of qualified tuition expenses for any year up to a maximum allowable credit of $2,000.

Choosing Which Credit

For each student, you can elect only one of the credits for each year. You cannot take the Hope credit and the LLC for the same student in the same year.

You can take the Hope credit for two years, and then claim the LLC for subsequent years for the same student. If two or more students are covered by the same return (e.g., married students filing jointly or parents claiming more than one student as a dependent), the Hope credit can be claimed for one and the LLC for the other.

Qualified tuition reduction (QTR) is available only to eligible GW personnel and does not apply to most full-time students. Certain graduate assistants, however, may qualify for such QTR. On the other hand, many tuition credits awarded to graduate assistants may be designated from institutional scholarship funds rather than as an employee benefit. For information on QTR, obtain a copy of the Employee Tuition Benefits & Tax Guide available from Human Resource Services.