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Hope Tax Credit Lifetime Learning Tax Credit Tuition and Fees Deduction

Agenda:. Taxes. Hope Tax Credit Lifetime Learning Tax Credit Tuition and Fees Deduction Important Information for 2008 Returns Qualified Tuition Programs Qualified Education Expenses Un-Qualified Education Expenses

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Hope Tax Credit Lifetime Learning Tax Credit Tuition and Fees Deduction

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  1. Agenda: Taxes • Hope Tax Credit • Lifetime Learning Tax Credit • Tuition and Fees Deduction • Important Information for 2008 Returns • Qualified Tuition Programs • Qualified Education Expenses • Un-Qualified Education Expenses • Departmental Scholarships, Fellowships and Grants to U.S. Resident and Citizen students • Hope & Lifetime Learning Tax Credit Form 1098T 1

  2. Hope • Lifetime Learning Starting in 1998, the IRS promoted two tax credits to help students or families offset the costs of higher education by reducing the amount of the income tax, also referred to as education credits. 2

  3. Hope Tax Credit • The credit increased to $1,800 per eligible student in 2008 • Only for first two years of undergraduate program • Must enroll at least half time • Must be enrolled for at least one academic period of the year 3

  4. Lifetime Learning • Up to $2,000 tax credit per year (20% of total payment of $10,000) • Available to all students and all programs • For an unlimited number of years • Credit and non-credit classes 4

  5. You Can Claim a Tax Credit • If you pay qualified education expenses • Your MGI is under $58,000 for a single person or under $116,000 if you file a joint return • To claim the credit, use form 1040A or 1040 • To calculate the tax credit, use form 8863

  6. You Cannot Claim Tax Credits • If your filing status is married filing separately • You are listed as a dependent in the exemptions section on another person’s tax return • Your income is over $58,000 for single and over $116,000 for married-joint return • You or your spouse were a non-resident alien for any part of 2008 and the non-resident did not elect to be treated as a resident for tax purposes

  7. Tuition & Fees Deduction • Taken as an adjustment to income • Available if your income is too high to take either the Hope or Lifetime • Income limit is $80,000 for single and $160,000 for married • Maximum deduction amount is $4,000 • To claim: • Use Form 8917 to calculate • Report on Line 34 on Form 1040 • Report on Line 19 on Form 1040A 7

  8. Important Information • Due date is April 15, 2009 • State sales tax can be claimed • Read publication 600 for more information • Exemption is $3,500 per person • Standard deduction is $5,450 for single and $10,900 for married couples

  9. Qualified Tuition Program (GET or 529 College Saving Program) • Many states have programs that allow people to prepay or contribute to an account for paying qualified education expenses • No tax is due on a distribution for a QTP unless the amount distributed is greater than the qualified education expenses • Washington State offers the GET program. Payments from this program are not reported on the 1098T tax form

  10. Qualified Education Expenses • Per IRS regulation, qualified education expenses are: • tuition and tuition-related fees for enrollment or attendance at an eligible educational institution 10

  11. Non-Qualified Education Expenses • Medical Expenses (including student health fees) • Transportation • Similar personal, living or family expenses • Insurance • Room & Board • Travel • Research • Clerical Help 11

  12. Departmental Scholarships, Fellowships, Grants • A scholarship or fellowship is tax free when: • the money is paying for qualified education expenses • AND • the student is working towards a degree 12

  13. Prizes, Awards and Stipends to U.S. Citizens & Resident Students • The money will affect students’ financial aid status and can affect a student’s tax credit. When departments award money in SDB, the UW does not withhold tax. • When departments award money in the SDB system, the Financial Aid Office will receive all the income information to determine the needs of students when they apply for financial aid. • Prizes, awards, and stipends are taxable income. 13

  14. 1098T form for the Hope & Lifetime Learning Credit • UW generates a 1098T form to all UW and Extension students by 02/02 • On-line printing available from web site • www.washington.edu/students/sfs/sao/maintax.html • Summarizes all the tuition and fee charges • Summarizes scholarship, fellowship and financial aid money for students • Helps students determine if they qualify for tax credit • Non–Resident Alien Students do not qualify and will not receive the 1098T form 14

  15. UW Form 1098T • UW reports tuition charges on IRS form Box 2. UW does not report payment information • Box 2 – total of qualified tuition and fees expenses • Box 5 – total of scholarship or financial aid grants. When you compare box 2 to box 5: • If box 2 total is greater than box 5 total, you will qualify for a tax credit • If box 5 total is greater than the box 2 total, you will have to report the difference in the amount as income

  16. UW Form 1098T Student Information Hope and Lifetime Learning Tax Credits Box 2 $6,534 Box 5 - 0 Difference $6,534 Amount Eligible for Tax Credit Calculation is $6,534 16

  17. UW Form 1098T Student Information Hope and Lifetime Learning Tax Credits Box 2 $22,494 Box 5 - 8,452 Difference $14,042 Amount Eligible for Tax Credit Calculation is $10,000 17

  18. UW Form 1098T Student Information Scholarship Income Box 2 $ 7,894 Box 5 - 9,039 Difference -$1,145 Amount Eligible to Claim as Income $1,145

  19. UW Form 1098T Student Information Stipend via Payroll Box 2 $ 6,624 Box 5 - 22,620 Difference - $15,996 Amount Eligible to Claim as income is $15,996 19

  20. IRS Form 1040 To report scholarship income: line 7 “sch” If you file electronically, the program may ask questions and automatically fill in the form(s)

  21. Line 50 To report tax credits from form 8863 IRS Form 1040 – Back

  22. IRS Form 1040A To report scholarship income: line 7 “sch” If you file electronically, the program may ask questions and automatically fill in the form(s)

  23. Line 31 To report tax credits from form 8863 IRS Form 1040A -Back

  24. To report scholarship income: line 1 “sch” IRS Form 1040EZ If you file electronically, the program may ask questions and automatically fill in the form(s)

  25. IRS Form 1040EZ – Back

  26. Electronic Filing

  27. Free Tax Services IRS “Guide to Free Tax Service” Contains: List of free tax publications Index of tax topics To contact your advocate: Phone:1-877-777-4778 Web: www.irs.gov/advocate 27

  28. Free Tax Services Seattle Public Library 1000 4th Ave. Seattle 98104 Tue, Wed, Thu 12:00 noon -7:00 p.m. Sat 12:00 noon – 4 p.m. Sun 1:00 p.m. - 5:00 p.m. 28

  29. For more information • IRS web site:www.irs.gov • Hope, Lifetime, Scholarships: • IRS Publication 970 29

  30. http://f2.washington.edu/fm/sfs/tax/student 30

  31. For a no-hassle, paperless, environmentally friendly 1098T, sign up to “Opt Out” of receiving the paper 1098T form. Student Fiscal Services will send you an email as soon as the 1098T is on your MyUW page! For more information go to: http://f2.washington.edu/fm/sfs/tax/student 31

  32. For Frequently Asked Questions UW student tax website http://f2.washington.edu/fm/sfs/tax/student Other Questions? Send email to: taxquest@u.washington.edu

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