Hope Scholarship Tax Credit:
The Hope Scholarship tax credit allows students, or their parents or guardians, to claim up to $1,500 per student per year for out-of-pocket tuition and fee expenditures. This $1,500 tax credit may be claimed for the first two years of undergraduate study. The Hope credit is available to taxpayers with a gross income of up to $50,000 (up to $100,000 for joint filers). The credit is phased out on a sliding scale for taxpayers earning $40,000 and above (and $80,000 and above for joint filers).
Lifetime Learning Tax Credit:
The Lifetime Learning tax credit allows college students or their families to claim up to 20 percent of qualified out-of-pocket tuition expenditures per year. The Lifetime Learning credit, which may be claimed for an unlimited number of years for both undergraduate and graduate study, allows qualified taxpayers to claim a tax credit equal to 20 percent of the first $10,000 spent on tuition and fees. The Lifetime Learning credit is available to taxpayers with a gross income of up to $50,000 (and up to $100,000 for joint filers). The credit is phased out on a sliding scale for taxpayers earning $40,000 and above (and $80,000 and above for joint filers).
Coverdell Education Savings Account:
Coverdell ESA's are savings accounts to finance the education expenses of a child or other designated beneficiary. Contributions are limited to $2000 per year and are not tax deductible. However, funds deposited into the account grow tax free until withdrawn to pay college tuition. Eligibility to make contributions to Coverdell Education Savings Accounts is phased out for contributors with modified adjusted gross income between $95,000 and $110,000 for single taxpayers ($200,000 and $220,000 for joint filers).
Deduction for Student Loan Interest:
The deduction for student loan interest allows borrowers to deduct interest paid on any loan used for college expenses. This deduction is available to all taxpayers, regardless of whether they take the standard deduction or itemize their deductions. The maximum deduction is $2,500 in 1998; $1,500 in 1999; $2,000 in 2000; and $2,500 in 2001 and thereafter. The deduction is phased out for single taxpayers with modified adjusted gross income of between $50,000 and $65,000 ($100,000 and $130,000 for joint returns).
Deduction for Tuition and Fees Expenses
Beginning in 2002, up to $30,000 of qualified tuition expenses may be deducted from your taxable income. This deduction is available to all taxpayers, regardless of whether they take the standard deduction or itemize. There are no income phase outs, therefore this deduction may be beneficial to taxpayers who cannot take either of the education credits because their income is too high.
Exclusion for Employee Education Benefits (Section 127)
This provision allows workers to exclude from taxable income up to $5,250 a year in undergraduate tuition assistance provided by their employers.