lectur8-page20 - $1,207. Apply the Hope Tax Credit: 100% of...

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Reduce Tuition and Fee Cost u The following are links to information regarding two income tax credits that you and your family may find useful: u Hope Tax Credit u Lifetime Learning Credit u More Details Recent changes in the tax code allow you to reduce you tax liability with as much as a $1,500 tax credit each year for the first two years of college. A tax credit is a dollar for dollar reduction of your tax liability. Suppose when you finish filling out your tax return, the form indicates that you owe $2,000 in taxes to the federal government. The Hope Tax Credit will allow you to reduce this tax liability by as much as $1,500. $2,000 taxes owed - $1,500 tax credit = $500 taxes owed after applying the credit. The savings are significant. For the typical, resident, first year student, tuition and fees for fall 2000 are
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Unformatted text preview: $1,207. Apply the Hope Tax Credit: 100% of the first $1,000, and 50% of the next $1,000 not to exceed a total tax credit of $1,500 for the tax year. This comes out to be $1,000 + (.5 x $207) = $1,103.50 tax credit for the year 2000. After tax tuition and fees for the fall semester end up being $103.50. Spring semester begins a new tax year for most folks, so another $1500 maximum tax credit is available for 2001. Assuming tuition remains unchanged (unlikely), again your after tax tuition and fees for the spring semester 2001 would end up being $103.50. Your first year of college winds up costing you $207.00 for tuition and fees after taxes. Not too bad....
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