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Taxpayer
Relief Act of 1997
The Taxpayer Relief
Act of 1997 created several new tax benefits for families who are saving
for, or already paying, higher education costs or are repaying student
loans.
A few of the benefits
provided by this Act include the Hope credit, Lifetime Learning credit,
and a student loan interest deduction.
The information
provided is not intended as legal or tax advice. Individuals should
obtain IRS Publication
970, Tax Benefits for Higher Education, or contact a tax practitioner
about personal income tax situations.
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Hope
Credit
You may be entitled
to a new tax credit resulting from the TAXPAYER RELIEF ACT OF 1997.
Beginning January 1, 1998, The HOPE CREDIT will be available to first
and second year, full time undergraduate students. A tax credit of 100%
of the first $1,000 and 50% of the second $1,000 (for a total of up
to $1,500) spent for qualified tuition and fees (less scholarships,
grants, and other tax-free educational assistance) can be used for each
of the student's first two years. The amount a taxpayer may claim as
a HOPE CREDIT is gradually reduced for taxpayers with modified adjusted
gross income (AGI) between $40,000 and $50,000 (between $80,000 and
$100,000 for married taxpayers filing jointly). Taxpayers with income
levels in excess of these amounts may not claim the credit.
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Lifetime
Learning Credit
Beginning July
1, 1998, taxpayers may be able to claim the LIFETIME LEARNING CREDIT.
The student must be enrolled in at least one post-secondary course at
an eligible institution. Students or parents may claim a 20% tax credit
for the first $5,000 of tuition and required fees paid each year (for
all students in the family). The LIFETIME LEARNING CREDIT can be claimed
for tuition and required fees minus any grants, scholarships, or other
tax-free educational assistance. The maximum credit is determined on
a per-taxpayer (family)basis, regardless of the number of post-secondary
students in the family. The amount a taxpayer may claim as a LIFETIME
LEARNING CREDIT is gradually reduced for taxpayers with modified adjusted
gross income (AGI) between $40,000 and $50,000 (between $80,000 and
$100,000 for taxpayers filing jointly).
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Student
Loan Interest Deduction
This is an above-the-line
deduction (the taxpayer does not need to itemize in order to claim this
deduction) for interest paid in the first 60 months of repayment on
private or government backed loans for payments due and made on or after
January 1, 1998. The amount eligible for the deduction is limited to
post-secondary expenses for tuition, fees, books, equipment, room, and
board. The amount of deduction for the tax year 2001 is generally the
smaller of $2,500, or your interest payments that were both paid in
2001, and paid during the first 60 months that interest payments were
required. The amount of the deduction is phased out at certain income
levels.
If student loan
interest of $600 or more has been paid in a tax year, and payments are
within the first 60 months of the repayment period, the eligible educational
institution, financial institution, or governmental unit is required
to issue a form 1098-E, Student Loan Interest Statement.
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IRS
Links
Hope
Credit
Lifetime
Learning Credit
Student
Loan Interest Deduction
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Privacy
Act Issues
Release
of Student Information
Public Law 93-380 requires that the student give written permission
for the release of "any personally identifiable information"
other than general "directory information." Personally identifiable
means that the data or information includes (a) the student's parent
or other family member, (b) a personal identifier, such as the student's
social security possible to identify the student with reasonable certainty,
or (d) other information which would make it possible to identify the
student with reasonable certainty.
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