The Hope Scholarship & Lifetime Learning Credits for college costs are claimed on Form 8863, Education Credits. Both credits are phase out when your adjusted gross income reaches $80,000 for joint returns ($40,000 for singles). If you’re divorced or separated, you must be entitled to your child’s dependent exemption to take the credit. Any amount of the credit that is lost because of the phase out cannot be carried over and claimed in a subsequent year.

If your income is too high, your child may be able to claim a credit if he or she isn’t claimed as a dependent on your return. Your child must have taxable income for the credit to do any good.

A taxpayer may claim a Hope credit for qualified tuition and related expenses of each eligible student and a Lifetime Learning credit for qualified expenses of one or more other students. However, a taxpayer cannot claim both credits for the same student in the same year. The total education credit is the sum of the Hope credit and the lifetime learning credit. No education credit can be claimed for a student in the same year that amounts are contributed to or withdrawn tax-free from an education IRA set up for the student.

QUALIFIED TUITION & FEES-Only available for tuition & fees paid to a college or other institution of higher education as a condition for enrollment or attendance at the institution. Expenses incurred for room & board, insurance, medical expenses, & transportation do not qualify. Expenses for books, supplies, & equipment qualify only if they are paid directly to the institution as a requirement of enrollment or attendance. The credit cannot be claimed for tuition paid for courses covering sports or games. Nor can the credit be claimed for non-credit courses, unless the course is part of the student’s degree program, or in the case of the lifetime learning credit is taken to acquire or improve job skills.

HOPE SCHOLARSHIP CREDIT-Prior to 2002, the credit is equal to 100% of the first $1,000 of qualifying expenses for the year, plus 50% of the next $1,000, for a maximum credit of $1,500. The credit is available for expenses paid after 1997 for academic periods beginning after that date. The credit can be claimed in no more than two years for each eligible student.

LIFETIME LEARNING CREDIT-This credit is a per-taxpayer credit. Prior to 2003, the credit is equal to 20% of the first $5,000 of qualifying expenses (maximum of $1,000) incurred. After 2002, the credit is 20% of the first $10.000 of expenses (maximum credit of $2,000). The credit can be claimed for expenses paid after June 30, 1998, for academic period beginning after that date.