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Week of 29 January 1999 Vol. II, No. 21 Feature Article Extra credit New tax breaks available for scholars and parents By Hope Green With tax season under way, students and their parents have begun looking to the University for guidance on the federal government's new tuition benefits. The Hope Scholarship Credit and the Lifetime Learning Credit will permit eligible U.S. families to make a sizable dent in their payments to the IRS this year. "We're trying to give people the information they need, but we also want to direct them to the experts and the right publications, rather than attempt to give out actual tax advice," says Steven Singer, Boston University's senior associate comptroller. Singer urges families not to miss out on the new credits, enacted as part of the Taxpayer Relief Act of 1997. More advantageous than a tax deduction, which lowers taxable income and may or may not nudge the taxpayer into a lower payment bracket, a credit shaves off dollars from the actual tax owed. Steven Singer, BU's senior associate comptroller, urges families with tricky tax questions to consult the pros. Photo by Vernon Doucette To be eligible for either or both credits, the taxpayer must have an adjusted gross income of less than $100,000 if married and filing jointly, and less than $50,000 if single, the head of a household, or widowed. Tuition and fees required for enrollment or attendance at an eligible institution are covered. Room and board, insurance, transportation, books, and most equipment are not. Here's how the two tax benefits compare: the Hope Scholarship Credit allows eligible parents of college freshmen and sophomores a credit of up to $1,500 per student for qualified educational expenses paid January 1 through December 31, 1998. The Lifetime Learning Credit, on the other hand, can be used by individuals or a combination of family members, with no restriction on the student's year in school. Training to improve one's job skills is covered, as are degree- and certificate-granting programs. The Lifetime credit went into effect last July, so educational costs tallied on this spring's tax forms are those paid during the last six months of 1998. Twenty percent of each family's eligible education costs are covered, to a maximum of $1,000 per family. Under the new regulations, Singer says, a family may qualify for the Lifetime and Hope credits in the same calendar year if, for instance, a parent of a college sophomore enrolls in a certificate program to study computer graphic design. Both credits, however, cannot be claimed simultaneously for any student. By February 1, colleges and universities are required by law to compile and mail IRS Form 1098T, the Tuition Payment Statement, to every student's home. For that task, BU has contracted with National Computing Services (NCS), which will answer general questions but, Singer reminds students, does not provide tax advice. Instead, Singer refers clients to their family tax counselor and to IRS Publication 970, Tax Benefits for Higher Education, available through the IRS Web site at www.irs.ustreas.gov/prod/cover.html. "The decision tree to determine whether you're eligible is complex," Singer notes, "but I think a family would find it worthwhile to get up to $1,500 for a half hour's work."