Tuition and Fees Deduction:
The tuition and fees deduction can reduce the amount of your income subject
to tax by up to $4,000 per family for the cost of qualified tuition and related expenses paid for
yourself, your spouse or your dependent(s) to a qualified educational institution. The deduction is available for four
years, 2002 through 2008 and is allowed even if you do not itemize your deductions on Schedule A of Form 1040. However,
if you elect to use the Tuition and Fees Deduction, you cannot also claim the Hope and Lifetime Learning Tax Credit
(described below).
An explanation of this deduction as well as the income limitations are included in the instructions for completing individual income tax returns IRS Form 1040 or 1040A.
Hope Scholarship (the "Hope") Tax Credit:
The Hope tax credit enables a taxpayer to claim a tax credit of up to
$1,800 per student for the cost of qualified tuition and related expenses pertaining to the first two years of post-secondary
education at an eligible educational institution. The credit applies to tuition and related expenses paid by the
taxpayer during the tax year on behalf of the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependents. To be
eligible, the student must be enrolled as a first or second year student in an undergraduate degree program, and carry
at least one-half the normal full-time work load (i.e., 6 credits per semester) for the course of study that the
student is pursuing in any academic period during the tax year.
Lifetime Learning Tax Credit:
The Lifetime Learning tax credit is more broadly applicable to any level
of post-secondary education, and it enables a taxpayer to claim a tax credit of up to $2,000 per family for the cost of
qualified tuition and related expenses paid by the taxpayer during the tax year on behalf of the taxpayer, the
taxpayer’s spouse, or the taxpayer’s dependents. Qualified tuition and fees include the cost of any course of
instruction (e.g., undergraduate, graduate and continuing education) taken at an eligible educational institution
in order to acquire or improve job skills.
Income Limitations:
For all education tax benefits, married taxpayers must file a joint return to claim the deduction or credit.
In 2008, the amount of qualified education expenses you can take into account in figuring your Tuition and
Fees Deduction is $4,000. If your modified adjusted gross income is not more than $65,000 for single taxpayers and
$130,000 if you are married filing jointly. If your modified adjusted gross income is greater than $65,000 for single
taxpayers and $130,000 if you are married filing jointly, but is not more than $80,000 for single taxpayers and
$160,000 if you are married filing jointly, your maximum tuition and fees deduction is $2,000. No tuition and fees
deduction is allowed if your modified adjusted gross income is greater than $80,000 for single taxpayers and married
taxpayers filing joint returns of $160,000 or greater.
The Hope and Lifetime Learning Tax credits are available to single taxpayers with modified adjusted gross income of
$48,000 or less, and married taxpayers filing joint returns of $96,000 or less. A proportional phase out takes place
for those with incomes between $48,000 to $58,000 for single taxpayers, and between $96,000 and $116,000 for married
taxpayers. Married taxpayers must file a joint return in order to claim either credit. Return To Top
Qualified Tuition and Related Expenses:
Qualified tuition and related expenses for both tax credits are defined in the Act as tuition and fees required for
the enrollment or attendance of the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependents at an eligible
educational institution for courses of instruction. The University is considered an eligible education institution
under the Act. Qualified tuition and fees do not include: (1) amounts paid for any course or other education involving
sports, games, or hobbies, unless the course or other education is part of the student’s degree program; and (2) charges and
fees associated with room, board, insurance, books, equipment, transportation, and similar personal, living, or family
expenses.
Based on the tax law as enacted, it appears that the following tuition and fees imposed by the University would qualify
for the tax credits: NJ Tuition, Non Resident Tuition, College Fee, Computer Fee, Student Resource Fee, Commuter Fee,
Orientation Fee, and course specific fees. Based on the University’s understanding of the tax law, the following
University imposed fees would not qualify for the tax credits: Housing, Dining, Knight Express charges. NJPIRG Fees,
Targum Fees, Parking Fees, RU Partial Payment Plan Fees and Late Fees. Return To Top
Eligible Payments:
The education tax credits are based on the amount of qualified tuition and fees actually paid by the taxpayer or the
student claimed as a dependent on the taxpayer’s tax return. For this purpose, payments do not include scholarships,
fellowships, financial aid grants (e.g., Federal Pell grants and New Jersey Aid grants) or non-taxable tuition
remission benefits received by the student. The amount paid, however, would include amounts borrowed by the student
(e.g., Perkins student loans and Federal Direct student loans) to pay for qualified tuition and fees.
The regulations provide rules for allocating scholarship, fellowship and financial aid grants among qualified and
non-qualified expenses. The regulations generally provide that a non-taxable scholarship, fellowship or financial aid
grant reduces the amount of qualified tuition and related expenses that a taxpayer may otherwise include in claiming
education credit. The Hope tax credit is available for 100 percent of the first $1,100 of qualified tuition and fees
paid and 50 percent of the next $1,000 paid per tax year per student. The maximum tax credit is $1,800 per student per
year. The Lifetime Learning tax credit is available for 20 percent of the first $10,000 of qualified tuition and fees
paid per year per family. The maximum tax credit is $2,000 per family per year. The Hope and Lifetime Learning tax
credits cannot both be claimed for the same student in the same tax year. The taxpayer may claim both tax credits on one
tax return (for different students) but must choose which credit to claim for each student. Taxpayers will need to file
IRS Form 8863 Education Credits * with their tax returns to claim the tax credits. Return To Top
Additional Sources of Information:
The IRS has issued Publication 970, Tax Benefits for Higher Education, which describes the new tax credits along with
other tax savings opportunities related to the costs of higher education. You may obtain this Publication at any IRS
office or download it from the Internet or call 1-800-829-3676. The IRS will answer you tax questions at
1-800-829-1040. Return To Top
For more information, please call: (732) 445-7590
or email: Tax Help
This information is not intended as legal or tax advice. Individuals should obtain IRS Publication 970, Tax Benefits for Higher Education, or contact a tax advisor about personal income tax situations.