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taxmap/pubs/p970-007.htm#TXMP78c25c0c Figuring the Credit(p14)

The amount of the Hope credit (per eligible student) is the sum of:

1. 100% of the first $1,100 of qualified education expenses you paid for the eligible student, and
2. 50% of the next $1,100 of qualified education expenses you paid for that student.

The maximum amount of Hope credit you can claim in 2007 is $1,650 times the number of eligible students. You can claim the full $1,650 for each eligible student for whom you paid at least $2,200 of qualified education expenses. However, the credit may be reduced based on your modified adjusted gross income (MAGI). See Effect of the Amount of Your Income on the Amount of Your Credit on this page.

taxmap/pubs/p970-007.htm#TXMP09cfa5fb
Example.(p14)

Jon and Karen Frost are married and file a joint tax return. For 2007, they claim an exemption for their dependent daughter on their tax return. Their MAGI is $70,000. Their daughter is in her sophomore (second) year of studies at the local university. Jon and Karen paid qualified education expenses of $4,300 in 2007.

Jon and Karen, their daughter, and the local university meet all of the requirements for the Hope credit. Jon and Karen can claim a $1,650 Hope credit in 2007. This is 100% of the first $1,100 of qualified education expenses, plus 50% of the next $1,100.

taxmap/pubs/p970-007.htm#TXMP343438ed Form 1098-T.(p14)

To help you figure your Hope credit, you should receive Form 1098-T. Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2008. An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. However, the amounts in boxes 1 and 2 of Form 1098-T may be different than what you actually paid. When figuring the credit, use only the amounts you paid in 2007 for qualified education expenses.

In addition, your Form 1098-T should give you other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether you were enrolled at least half-time or were a graduate student.

The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number.

taxmap/pubs/p970-007.htm#TXMP7ce64fe3 Effect of the Amount of Your Income on the Amount of Your Credit(p14)

Effect of the Amount of Your Income on the Amount of Your Credit

The amount of your Hope credit is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $47,000 and $57,000 ($94,000 and $114,000 if you file a joint return). You cannot claim a Hope credit if your MAGI is $57,000 or more ($114,000 or more if you file a joint return).

taxmap/pubs/p970-007.htm#TXMP65a86299 Modified adjusted gross income (MAGI).(p14)

For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return.

taxmap/pubs/p970-007.htm#TXMP584aed91 MAGI when using Form 1040A.(p14)

If you file Form 1040A, your MAGI is the AGI on line 22 of that form.

taxmap/pubs/p970-007.htm#TXMP16ffb7f2 MAGI when using Form 1040.(p14)

If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any:

1. Foreign earned income exclusion,
2. Foreign housing exclusion,
3. Exclusion of income for bona fide residents of American Samoa, and
4. Exclusion of income for bona fide residents of Puerto Rico.

You can use Worksheet 2-1, next, to figure your MAGI.

taxmap/pubs/p970-007.htm#w25221v0201

Worksheet 2-1.mMAGI for the Hope Credit 1. Enter your adjusted gross income (Form 1040, line 38)   1.              2. Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2.                  3. Enter the amount of income from Puerto Rico that you are excluding   3.                  4. Enter the amount of income from American Samoa that you are excluding (Form 4563, line 15)   4.                  5. Add the amounts on lines 2, 3, and 4   5.              6. Add the amounts on lines 1 and 5. This is your modified adjusted gross income. Enter this amount on Form 8863, line 9   6.

taxmap/pubs/p970-007.htm#TXMP5beb86d6 Phaseout.(p15)

If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 7–13 of Form 8863. The same method is shown in the following example.

taxmap/pubs/p970-007.htm#TXMP69a0947c
Example.(p15)

You are filing a joint return and your MAGI is $95,000. In 2007, you paid $5,000 of qualified education expenses.

You figure a tentative Hope credit (100% of the first $1,100 of qualified education expenses, plus 50% of the next $1,100 of qualified education expenses) of $1,650.

Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,650) by a fraction. The numerator of the fraction is $114,000 (the upper limit for those filing a joint return) minus your MAGI. The denominator is $20,000, the range of incomes for the phaseout ($94,000 to $114,000). The result is the amount of your phased out (reduced) Hope credit ($1,568).

$1,650

×

$114,000 − $95,000 $20,000

=

$1,568

Previous Page:  Publication 970 - Tax Benefits for Education - Who Can Claim a Dependent's Expenses Next Page:  Publication 970 - Tax Benefits for Education - Claiming the Credit Use   to find additional occurrences of topic items.