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FAQ: Education Credits

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Question:   Do tuition and related expenses paid to attend a private high school qualify for an education credit?
Answer:   No. Expenses paid to attend a private high school do not qualify for an education credit because a high school is not an eligible educational institution.In general, an eligible educational institution is an accredited college, university, vocational school, or other postsecondary educational institution.  In addition, in order to be an eligible educational institution, the school must be eligible to participate in a student aid program administered by the Department of Education.
Question:   What expenses qualify for an education credit?
Answer:   Expenses that qualify for an education credit are qualified tuition and related expenses paid by the taxpayer during the taxable year.  Qualified tuition and related expenses are tuition and fees required for the enrollment or attendance of the taxpayer, the taxpayer’s spouse or the taxpayer’s dependent at an eligible educational institution for courses of instruction.  An eligible educational institution means a college, university, vocational school or other postsecondary educational institution that is accredited and eligible to participate in the student aid programs administered by the Department of Education.Qualified tuition and related expenses do not include the following types of expenses:

  • Expenses related to any course of instruction or education involving sports, games or hobbies, or to any noncredit course (unless the course is part of the student’s degree program or, in the case of the Lifetime Learning Credit, the student takes the course to improve job skills),
  • Student activity fees (unless required for enrollment or attendance),
  • Athletic fees (unless required for enrollment or attendance),
  • Costs of room and board,
  • Insurance premiums or medical expenses (including student health fees),
  • Transportation expenses, and
  • Other personal, living or family expenses.

In general, qualified tuition and related expenses generally do not include the costs of books, supplies and equipment, because eligible educational institutions usually do not require payment of those costs to the institution as a condition of the student’s enrollment or attendance.  For taxable years 2009 through 2012, however, qualified tuition and related expenses include costs of course materials, as well as tuition and fees, required for the student’s enrollment or attendance at an eligible education institution.
Question:   Who can claim the Hope Credit or the American Opportunity Credit?
Answer:   Generally, you can claim the Hope Credit if all three of the following requirements are met:

  • You pay qualified tuition and related expenses for the first 2 years of postsecondary education.
  • The tuition and related expenses are for an eligible student.
  • The eligible student is you, your spouse, or a dependent for whom you claim an exemption on your tax return.

You cannot claim the Hope Credit if any of the following applies:

  • Your filing status is married filing separately.
  • You are listed as a dependent in the Exemptions section of another person’s tax return (such as your parents’).
  • Your modified adjusted gross income is above a certain dollar limitation.
  • You (or your spouse) were a nonresident alien for any part of the tax year, and the nonresident alien did not elect to be treated as a resident alien for tax purposes.
  • You claim the Lifetime Learning Credit for the same student in the same year.

In general, the Hope Credit is based on tuition and related expenses required for enrollment or attendance at an eligible educational institution.

For a taxpayer to claim the Hope Credit, the student for whom you pay tuition and related expenses must be an eligible student. To be an eligible student, generally, the student must:

  • Not have had expenses that were used to figure a Hope Credit in any 2 earlier tax years.
  • Not have completed the first 2 years of postsecondary education (generally, the freshman and sophomore years of college) before this tax year.
  • Must have been enrolled at least half-time in a program that leads to a degree, certificate, or other recognized educational credential for at least one academic period beginning in the tax year.
  • Must have been free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.

For tax years 2009, 2010, 2011, and 2012, the American Opportunity Tax Credit modifies the Hope Credit as follows:

  1. The maximum amount of the credit is increased to $2,500.00.
  2. The credit can now be claimed for the first 4 years, not 2, of postsecondary education.
  3. The modified adjusted gross income limitations are increased.
  4. Qualified expenses include course materials.
  5. Generally, 40% of the Hope Credit is now refundable (up to $1,000).

However, for a student who attended an educational institution located in a Midwest disaster area, you can choose instead to claim the credit under the previous rules, but then you must use the previous rules for all students for whom you claim the credit.