1. What is the HOPE Scholarship?

The HOPE "Scholarship" is actually not a "scholarship." It is a tax credit available to eligible students during their first two years of postsecondary education. The tax credit covers 100% of the first $1,000 of tuition and fees and 50% of the second $1,000 during the qualified period. The credit is non-refundable (see FAQ 4).

2. Why did Walters State send a "1098" statement to me?

Because of the Tax Relief Act of 1997 that became effective January 1, 1998, Walters State sent a 1098T form to all resident students enrolled during 2001. The 1098T form is used in conjunction with the Hope Scholarship and Lifetime Learning Credits.

3. Does that mean I am eligible to claim the amount in Box 1 as a tax credit?

Not necessarily, consult your tax advisor on computing and claiming the credit.

4. What is the Qualified Grants and Scholarships amount in Box 3?

It is the total Grants and/or Scholarships applied to your account during 2001. Amounts for these items generally offset and reduce the amount of qualified tuition and fees eligible for tax credit. In general, scholarships and grants are nontaxable to the extent that they are used to pay tuition and fees. When nontaxable, they offset the amount of tuition and fees eligible for tax credit.

5. What is the difference between a tax credit and an income deduction?

Tax credits are subtracted directly from the tax owed, rather than reducing taxable income. A tax return must be filed and taxes owed to take advantage of it. The Hope tax credit is not refundable for anyone who does not pay taxes or who owe less in taxes than the maximum amount of the Hope tax credit for which the individual is eligible.

6. How much is the credit?

A family may claim a tax credit of up to $1,500 per tax year for each eligible dependent. This can be done for up to two tax years. A family may claim up to 100% of the first $1,000 of eligible expenses and 50% of the next $1,000 for a maximum credit of $1,500.

The actual amount of the credit depends on the family’s income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. The total maximum credit also is based on the number of eligible dependents, rather than a maximum dollar amount for the family, as with the Lifetime Learning tax credit.

7. What are the qualified expenses at Walters State?

Generally, qualified tuition and fees are all fees required to be paid to attend school. At Walters State, all fees except graduation fees are normally considered required. Required fees such as maintenance fees (In State tuition), Out-of-State tuition, technology access fees, campus access fees, student activity fees, application fees, and special course fees (music, police academy, and culinary arts) in most cases will qualify for tax credits. Consult your tax advisor.

8. Who can claim the credits?

It depends upon your dependency status. Consult your tax advisor.

9. Who is eligible?

To be eligible, a student must be enrolled in a degree, certificate, or other program leading to a recognized education credential (i.e., associate degree, technical certificate, etc.). The student must be enrolled at least halftime.

10. When does it take effect?
    The HOPE tax credit applies for expenses paid after December 31, 1997, and for education provided in academic periods beginning after that date.
11. How long is it available?
    The tax credit is available for two tax years to those students who have not completed the first two years of postsecondary education.
12. Does the tax credit affect my Pell Grant or other financial aid?
    The amount of tuition and fees covered by the HOPE tax credit is reduced by other grant and scholarship aid received. This includes scholarship funds excluded from an individual’s gross income, as well as federal grant aid such as Pell Grants. Example: If a student incurs $1,250 in tuition and fees and receives a Pell Grant greater than $1,250, he is not eligible for the HOPE credit. Alternatively, if a student is responsible for $1,250 in tuition and fees and receives a Pell Grant of $700, the student is eligible for a tax credit of $550.
13. Are there any restrictions?
    Yes. Students convicted of a felony related to the possession or distribution of a controlled substance such as heroin or marijuana are not eligible. In addition, individual filers who earn income more than $50,000 are ineligible, as are joint tax filers whose income exceeds $100,000. The tax credit is also reduced by certain other types of financial aid received by the student such as the Pell Grant.
14. How do I apply?
    Eligible individuals will claim the credit when they file their federal income tax forms.
15. How does it work for part-time students?
    Students attending less than half time are not eligible for the HOPE tax credit. However, they are eligible for the lifetime learning credit described below.
16. Do I have to file a separate IRS form or will it be part of the standard 1040?
    Details for the new program are still being worked out. However, it is likely that students filing for the tax credit will have to complete a separate tax schedule similar to those required for interest and dividend income or child care expenses.
17. Who administers the program?
    The college or other educational institution is responsible for reporting the name, address, and taxpayer identification number of the student. In addition, to providing information relating to any other individual who might claim the student as a dependent for the purpose of filing for the HOPE tax credit. Colleges would also be required to document the net payments of qualified tuition and tuition incurred by students for HOPE.
18. Can A Family Claim Multiple Benefits?

A family may claim a Lifetime Learning credit, a Hope credit, and an exclusion from gross income for certain distributions from qualified State tuition programs or education IRAs. This may be done as long as the same student is not used as the basis for each credit or exclusion and the family does not exceed the Lifetime Learning maximum per family.

19. What are some of the other new educational tax benefits?

• Who Qualifies?
• The Taxpayer: An eligible taxpayer must file a tax return and owe taxes to claim the credit. The taxpayer must also claim the eligible student as a dependent unless the credit is for the taxpayer or the taxpayer's spouse. The taxpayer is eligible for the maximum benefit with an Adjusted Gross Income (AGI) of up to $40,000 for a single taxpayer (or $80,000 for married taxpayers). The credit amount is phased out between $40,000 and $50,000 for single taxpayers (or $80,000 and $100,000 for married taxpayers).

• The Student: An eligible student may be enrolled at least half time in an eligible program leading to an undergraduate or graduate degree at an eligible school during the calendar year. Or may be enrolled at any enrollment level in any course of instruction at an eligible school to acquire/improve the student's job skills during the calendar year. The student may claim the credit if the student is not claimed as a dependent by another taxpayer.
• How Do You Get the Credit?
• To qualify for the credit, the taxpayer must report the amount of tuition and fees paid, as well as the amount of certain scholarships, grants, and untaxed income used to pay the tuition and fees. Current law specifies that schools will supply this information in the form of a "return" to individual taxpayers and to the IRS. More information about the return will be available after the Treasury Department issues regulations to implement this law.
• When Is the Credit Available?
• The taxpayer may claim the Lifetime Learning credit for qualified expenses paid July 1, 1998 and after.

Additional information on the Hope Scholarship can be found at the following: