Hope Scholarship

Hope Scholarship is a new Federally-enacted tax benefit that could pay for most of your Sinclair education.

Hope Scholarship information will be covered at new student orientations, admissions enrollment counseling sessions, and at Sinclair Central in Room 10242. Further information is also available in the Admissions office.

What is the Hope Scholarship?

This is actually a tax credit - not a scholarship. Tax credits are subtracted directly from taxes owed, rather than reducing taxable income like a tax deduction. A family or single adult must file a tax return and owe taxes to take advantage of the Hope tax credit.

What is the maximum benefit?

Up to $1,500 per tax year for a maximum of two years may be claimed for each eligible student during his or her first two years of undergraduate education. The formula is 100% of the first $1,000 of eligible expenses and 50% of the next $1,000 for each of the two years.

Who qualifies?

Eligibility for the Hope Scholarship is automatic. There are no applications to fill out or grade or testing requirements to meet. However, there are some eligibility stipulations that apply to both the student and/or taxpayer. The student must be enrolled at least half time (six or more credit hours per term) in an associate degree or certificate program.

The student must not have already completed the first two years of undergraduate study. Students convicted of a felony related to the possession or distribution of a controlled substance, such as heroin or marijuana, are not eligible. The taxpayer, who may also be the student if not claimed as a dependent by another taxpayer, must file a tax return and owe taxes at least equal to the credit in order to claim the credit. The taxpayer must also claim the eligible student as a dependent unless the student is the taxpayer's spouse and the couple is filing a joint return. Taxpayers with an adjusted gross income (AGI) of up to $40,000 for a single taxpayer or $80,000 for married taxpayers filing jointly, are eligible for the maximum benefit. The credit amount is phased out between income levels of $40 - $50,000 for single taxpayers or of $80 - $100,000 for married taxpayers filing jointly.

When does it take effect?

The tax credit applies to eligible expenses paid January 1, 1998, and after for education provided in academic periods beginning on or after that 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 1998 for an academic period beginning in the first three months of 1999). Because the law did not take effect until January 1, 1998, these prepayments are not permitted for the first year of credit.

What are eligible expenses?

The Hope Scholarship applies only to tuition and certain fees - not to books or living expenses.

Does the tax credit affect my Pell Grant or other financial aid?

No. However, the other forms of financial aid the student receives can reduce the amount of tuition and fees covered by the Hope tax credit. 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 of $700, the student is eligible for a tax credit of $550.

How may a student apply?

Eligible individuals will claim the credit when they file their federal income tax forms.

Who administers the program?

The college or other educational institution is responsible for reporting the name, address and taxpayer identification number of the student, as well as for 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 eligible for Hope.

What if the student is not taking enough credits to qualify as a half-time student?

While the student may not be eligible for the Hope tax credit if he or she is only taking five or fewer credit hours, the student could be eligible for the new Lifetime Learning Credit. The Lifetime Learning Credit applies to college juniors, seniors, graduate students, adults returning to college and less-than-half-time students.

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 distribution from qualified state tuition programs or education IRA's 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 ($1,000 per year until January 1, 2003, and $2,000 per year after that).

The preceding is not intended to be legal or tax advice. For advice and assistance about a specific situation, consult the services of an attorney or other professional advisor. The purpose of this information is to provide general information about selected portions of the Taxpayer Relief Act of 1997.