A number of tax benefits are available for those paying for higher education for themselves and/or dependents, and for those currently repaying student loans. Three of these benefits are summarized below.

For further information on the types of credits and deductions you may be able to make, visit NAFSAA's Guide to Federal Tax Benefits for Tuition and Fees .

If you attended Bethany during the last year, we will send you a form 1098T near the end of January. This document provides some of the information to be used when determining if you can take any of these credits and deductions. You may contact the Business Office for specific questions or clarification of information provided on the forms, but Bethany cannot provide legal or tax advice.

Hope Scholarship

The Hope Scholarship is a tax credit, not a scholarship. Tax credits are subtracted from the tax your family owes, instead of subtracting them from taxable income like a tax deduction. Your family must file a federal tax return and owe taxes to get this tax credit. You cannot get a refund for the Hope credit if your family doesn't pay taxes. If your family owes less in taxes than the maximum amount of the Hope tax credit for which your family is eligible, you can only take the credit for the amount you owe in taxes.

The exact amount of the Hope credit depends on your family's income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. The total credit is also based on how many eligible dependents are in your family.

An eligible taxpayer must file a federal tax return and owe taxes to claim the Hope credit. In addition, the taxpayer must claim an eligible student as a dependent on the tax return, unless the credit is for the taxpayer or the taxpayer' spouse. (This means the eligible taxpayer may also be the eligible student.) You cannot claim a Hope credit if your Modified Adjusted Gross Income (MAGI) is $55,000 or more for a single taxpayer, or $110,000 or more for married taxpayers. The credit amount is gradually reduced for families with incomes between $45,000 and $55,000 if single, or $90,000 and $110,000 if married.

For more information on the Hope Scholarship, read IRS Publication 970 Tax Benefits for Higher Education .

Lifetime Learning Credit

The Lifetime Learning credit is a tax credit available to individuals who file a tax return and owe taxes. This means the amount of the credit is subtracted from the taxes your family owes, rather reducing taxable income like a tax deduction does. You cannot get a refund for the Lifetime Learning credit if your family doesn't pay taxes. If your family owes less in taxes than the maximum amount of the Lifetime Learning tax credit for which your family is eligible, you can only take the credit for the amount you owe in taxes.

As of tax year 2006 your family may claim a tax credit of up to $2,000 per tax year for the taxpayer, taxpayer's spouse, or any eligible dependents for an unlimited number of tax years. The amount of the Lifetime Learning tax credit is 20% of the first $10,000 of qualified educational expenses paid for all eligible students. Therefore, the maximum amount of a Lifetime Learning tax credit is $2,000. The Lifetime Learning credit is available for all years of postsecondary education and for courses to acquire or improve job skills. Unlike the Hope credit (which is only available for two years) the Lifetime credit is available for an unlimited number of years.

For more information on the Lifetime Learning Credit, read IRS Publication 970 Tax Benefits for Higher Education .

Student Loan Interest Deduction

This allows students or their families to take a tax deduction for interest paid on student loans. The maximum deduction $2,500. The deduction is phased out for joint filers with adjusted gross income between $105,000 and $135,000, and for single filers with modified adjusted gross income between $50,000 and $65,000. Remember that a deduction reduces the amount of income for tax purposes.