Hope tax credit

The United States federal Hope tax credit is a nonrefundable education tax credit of up to $1,800 (an increase from 2007) for each eligible student. Students in a qualified Midwestern disaster area may receive up to $3,600. An eligible student must meet all of the following requirements to deduct the Hope credit:

• be enrolled in one of the first two years of post-secondary education;
• be enrolled in a program that leads to a degree, certificate, or other recognized educational credential;
• be taking at least half of the normal full-time work load for his/her course of study for at least one academic period beginning during the calendar year;
• not have a felony conviction for possessing or distributing a controlled substance.

The credit is for up to 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) and 50% of the second $1,200 ($2,400 if a student in a Midwestern disaster area) of any college-related expenses, including tuition and supplies, during a taxable year. You may not take the Hope credit if you elect the lifetime learning credit or the education income exclusion for withdrawals from an education IRA.

History

According to Paulsen and Smart, the federal Hope tax credit gets its name from the Georgia State University merit scholarship program of the same name. HOPE (Helping Outstanding Pupils Educationally) although the Georgia state scholarship is a merit scholarship, the tax credit is not. Perhaps this is why the Hope tax credit lacks a definition for what HOPE stands for.

The Georgia state 1993 lottery-funded Hope scholarship program pre-dates the 1998 federal tax credit by 5 years.