University freshmen and sophomores seeking relief from the hefty cost of education may soon find comfort in a new federal tax credit.
The HOPE tax credit, signed into law by President Clinton last August as part of the Taxpayer Relief Act of 1997, went into effect Thursday. To earn the credit, students must be enrolled at least part-time at the school for one of their first two years.
Students won’t be eligible for the tax credit if they paid their tuition before Thursday. Students who earn more than $50,000 annually or come from families that make more than $100,000 per year are ineligible.
Parents or students footing the tuition bill may receive up to 100 percent of the first $1,000 of tuition and fees, and 50 percent of the second $1,000 spent on tuition for a total of two years.
But those who take advantage of the tax credit won’t see dividends until 1999, after 1998 taxpayer reports are filed.
Beth Nunnally, tax director at the University, said every student will receive a 1098-T tax form, detailing paid tuition. Her advice for parents and students is to hold on to all receipts and tuition forms.
“(Students) should be sure to receive the 1098-T form so they can see if the tax credit is available to them or their families,” Nunnally said.
She also noted that students and parents paying for tuition should contact a tax adviser to discuss eligibility for the credit.
The tax department is working on training the employees in the Office of Scholarships and Financial Aid on the specifics of the tax credit. And Nunnally plans to distribute a fact sheet about the HOPE tax credit.
Claire Althoff, a University extension educator in Wilkin County, said the availability of the tax credit has largely gone unnoticed in the state.
“People just haven’t heard about it,” Althoff said.
Most tuition deadlines for colleges and universities on a semester system are around the first of the year. Althoff said students and parents facing those deadlines may have to act more quickly.
The tax credit does not apply to money spent on room, board and books. And students convicted of a felony related to possession or distribution of a controlled substance are not eligible for the HOPE tax credit.
Those beyond their first two years of school could be eligible for other tax credits and rebates. The Lifetime Learning Credit is effective July 1. Taxpayers may claim 20 percent of their first $5,000 payments on tuition through the year 2002. After 2002, the $5,000 ceiling jumps to $10,000.
Eligibility requirements for this incentive are the same as for the HOPE tax credit.