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Alternative
Financing and Tax Credits
Tuition
Payment Plan Tax Credits In
addition to need-based financial aid there are several programs you may want to
consider to supplement you financial aid award or to assist you if you so not
qualify for need-based assistance. These programs may be used to finance
all or part of the total cost of attendance. Worcester
State College participates in a tuition payment plan offered through Academic
Management Services, Inc. The plan offers the family a low-cost, flexible method
of paying for educational expenses by prorating these costs over 10 months. This
is not a loan program. Additional information may be obtained from AMS, 1 AMS
Place, Swansea, MA 02777 or by calling 1-800-635-0120 or by contacting our
Bursar’s Office at (508) 929-8012. Lifetime
Learning Tax Credit The
Lifetime Learning credit is a tax credit available to individuals who file a
return and owe taxes. This means the amount of the credit is subtracted from the
taxes your family owes, rather reducing taxable income like a tax deduction
does. You can’t get a refund for the Lifetime Learning Tax credit id your
family doesn’t pay taxes. If your family owes less in taxes than the maximum
amount of the Lifetime Learning tax credit for which your family is eligible,
you can only take the credit for the amount you owe in taxes. Your
family may claim a tax credit up to $1,000 per tax year (until January 1, 2003)
and up to $2,000 (after that date) for the taxpayer, taxpayer’s spouse, or any
eligible dependents for an unlimited number of tax years. A family may claim up
to 20% of $5,000 or eligible expenses for expenses paid after June 30, 1998, and
prior to January 1, 2003, and up to 20% of $10,000 of eligible expenses (for
expenses paid after January 1, 2003, and after). The
actual amount of credit depends on your family’s income, the amount of
qualified tuition and fees paid, and the amount of certain scholarships and
allowances subtracted from tuition. This credit is family-based (e.g., $1,000
per family) rather than based on the number of dependents in your family like
the Hope Credit. Hope
Scholarship Tax Credit The
Hope Scholarship is a tax credit, not a scholarship. Tax credits are subtracted
from the tax your family owes, instead of subtracting them from taxable income
like a tax deduction. Your family must file a federal tax return and owe taxes
to get this tax credit. You can’t get a refund for the Hope credit if your
family doesn’t pay taxes. If your family owes less in taxes than the maximum
amount of the Hope tax credit for which your family is eligible, you can only
take the credit for the amount you owe in taxes. Your
family may claim a tax credit up to $1,500 for each eligible dependent for up to
two tax years. In other words, your family may claim up to 100% if the first
$1,000 of eligible expenses and 50% of the next $1,000 for a maximum credit of
$1,500. The
exact amount of the Hope credit depends on your family’s income, the amount of
qualified tuition and fees paid, and the amount of certain scholarships and
allowances subtracted from tuition. The total credit is also based on how many
eligible dependents are in your family, rather than a maximum dollar amount for
the family, like the Lifetime Learning tax credit. Who
Qualifies? The
Taxpayer: An eligible taxpayer must file a tax return and owe taxes to claim the
Hope credit. In addition, the taxpayer must claim an eligible student as a
dependent on the tax return, unless the credit is for the taxpayer or the
taxpayer’s spouse. (This means the eligible taxpayer may also be the eligible
student). Taxpayers may be eligible for the largest credit 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 gradually reduced for families with incomes
between $40,000 and $50,000 if single or between $80,000 and $100,000 is
married. The
Student: The tax law says an eligible student must be enrolled at least one-half
time in an eligible program leading to a degree or certificate at an eligible
school during the calendar year AND must not have completed the first two years
of undergraduate study. You may claim the credit yourself if you are not claimed
as a dependent by another taxpayer. (Once again, this means that the eligible
student may also be the eligible taxpayer). Also, you may not have been
convicted of a Federal or State felony drug offense before the end of the tax
year in which you are enrolled. Can
A Family Claim Multiple Benefits? A
family may claim a Hope credit, a Lifetime Learning credit and an exclusion from
gross income for certain distributions from qualified State tuition programs or
education IRAs as long as the same student isn’t used as the basis for each
credit or exclusion AND the family doesn’t exceed the Lifetime Learning
maximum per family. How
Do You Get It? To
apply 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. The law specifies that schools will send this
information in the form of a "return" to individual taxpayers and to
the IRS. For the 2000 tax year, this return will include: 1) the name, address,
and taxpayer ID number of the school; 2) the name, address, and taxpayer ID of
the student for whom tuition was paid; 3) whether the student was enrolled at
least half-time; and 4) whether the student was enrolled only in a
graduate-level program. Your school will mail this to you by January 31, 2001
for the 2000 tax year. This "return" from the school will also include
the phone number of a person you can call at the school if you have questions.
You will use this information and your own records about tuition and fee amounts
you paid to fill out the IRS Form 8863 to claim the tax credit. You may wish to
talk to a tax advisor for help in calculation the amount of your credit. When
Is It Available? The
taxpayer may claim the Hope credit or Lifetime Learning Tax Credit for qualified
expenses paid in tax years beginning July 1, 1998, and after, for education
furnished in academic periods beginning on or after this date. Taxpayers
may pay educational expenses in a tax year for an academic period that begins
following the tax year (e.g. paying in December 2000 for an academic period
beginning in the first three months of 2001). Because the law did not take
effect until January 1, 1998, you were not allowed to prepay for the first year
of the credit. Copyright
1998, National Association of Student Financial Aid Administrators Permission
to reprint, distribute, and/or post on web sites is granted to NASFAA Members.
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