Hope/Education Credit


M

Mommio2

Hi! I am using TurboTax Premiere and I am totally confused!
In the Hope/Education credits section, it asks if your
college student "is" in his/her first 2 years? Then, when I
go to the section that gives you more of an explanation, it
says "was" in the first 2 years. Here's the deal: Our son
is in his 3rd year of college. He was in his 2nd year up
until June of 2004. In September, he began his 3rd year.
What should my answer be? Another problem: The school sent
us a Tuition Statement. It lists amounts for qualified
tuition and scholarships and grants for Fall 2004 and Spring
2005, since we paid spring 2005 in 2004. If he is in the
middle of his 3rd year right now, what should I do?
Lastly, if I am able to use the amounts on the Tuition
Statement, should I subtract box 4 (scholarships) from box 2
(qualified tuition)? I feel like a total ditz, but even
this email confuses me!

Thanks in advance for your help!
Mommio
 
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A

A.G. Kalman

Mommio2 said:
Hi! I am using TurboTax Premiere and I am totally confused!
In the Hope/Education credits section, it asks if your
college student "is" in his/her first 2 years? Then, when I
go to the section that gives you more of an explanation, it
says "was" in the first 2 years. Here's the deal: Our son
is in his 3rd year of college. He was in his 2nd year up
until June of 2004. In September, he began his 3rd year.
What should my answer be? Another problem: The school sent
us a Tuition Statement. It lists amounts for qualified
tuition and scholarships and grants for Fall 2004 and Spring
2005, since we paid spring 2005 in 2004. If he is in the
middle of his 3rd year right now, what should I do?
Lastly, if I am able to use the amounts on the Tuition
Statement, should I subtract box 4 (scholarships) from box 2
(qualified tuition)? I feel like a total ditz, but even
this email confuses me!
The Hope credit is available for any qualified expense
incurred for an academic period that the student is
classified by the school as either a freshman or sophomore.
This could extend beyond two calender years. However, the
Hope credit can only be used in no more than two tax years
for that student. Once you have used the Hope in two tax
years, it is no longer available for that student. You can't
take the Hope Credit & the Lifetime Learning Credit in the
same year for the same student. In any given year where a
student may qualify for both credits, you should perform the
calculation both ways to see which one maximizes the tax
benefit.

As a cash basis taxpayer you use the amount actually paid in
2004 to compute the credit. If you paid tuition in 2004 for
an academic period that the student was a sophomore and also
paid tuition for a period in which the student was a junior,
you would have to identify the amount of expense that
qualified for the Hope (amount paid for Sophomore academic
period) and compute the tax benefit. Then you would use the
total amount paid to compute the LLC and see which one gives
the better answer.

Before you perform any calculation for the credit you must
first reduce any qualified expense by the amount of tax-free
educational assistance received. This would include tax-free
scholarships, grants, employer educational assistance and
government assistance such as VA benefits.
 
B

bono9763

Mommio2 said:
Hi! I am using TurboTax Premiere and I am totally confused!
In the Hope/Education credits section, it asks if your
college student "is" in his/her first 2 years? Then, when I
go to the section that gives you more of an explanation, it
says "was" in the first 2 years. Here's the deal: Our son
is in his 3rd year of college. He was in his 2nd year up
until June of 2004. In September, he began his 3rd year.
What should my answer be? Another problem: The school sent
us a Tuition Statement. It lists amounts for qualified
tuition and scholarships and grants for Fall 2004 and Spring
2005, since we paid spring 2005 in 2004. If he is in the
middle of his 3rd year right now, what should I do?
Lastly, if I am able to use the amounts on the Tuition
Statement, should I subtract box 4 (scholarships) from box 2
(qualified tuition)? I feel like a total ditz, but even
this email confuses me!
The status of your son on January 1, 2004 determines whether
he is elible for the Hope credit. He must be either a
freshman or sophomore, so it looks like he qualifies.
However, you can only use the Hope credit for 2 years, so if
you have already taken it, you can't use it for a third
year.

You can include payments made in 2004 for tuition in 2005 as
long as the semester started within a certain time of the
payments. I think it is 3 months but am not sure. I am sure
that if the semester started in January or February, you are
OK.

What you should include is actual funds spent. This should
be the tuition billed minus the scholarships, but schools
have been known to issue inaccurate information.

Incidentally, if the tuition and fees are greater than $7,500, you are
better off taking the Lifetime Learning Credit. FWIW

Dennis
 
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M

Mommio2

Mommio2 wrote:
The status of your son on January 1, 2004 determines whether
he is elible for the Hope credit. He must be either a
freshman or sophomore, so it looks like he qualifies.
However, you can only use the Hope credit for 2 years, so if
you have already taken it, you can't use it for a third
year.

You can include payments made in 2004 for tuition in 2005 as
long as the semester started within a certain time of the
payments. I think it is 3 months but am not sure. I am sure
that if the semester started in January or February, you are
OK.

What you should include is actual funds spent. This should
be the tuition billed minus the scholarships, but schools
have been known to issue inaccurate information.

Incidentally, if the tuition and fees are greater than $7,500, you are
better off taking the Lifetime Learning Credit. FWIW
Thanks to you both, very much!!!
 

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