The HOPE tax credit is one of several programs administered under the United States system of taxation for encouraging residents to seek out higher education with the assurance that some of the related costs can be offset. To this end, a finding that a taxpayer is applicable under HOPE can allow for such a person to relieve the tax burden faced under the IRS.
Instead of being addressed in the terms of the rates at which taxes are being paid by the applicable taxpayer, the HOPE tax credit will provide a specific amount which can be left out of that person’s tax payment. The program was first enacted for the use of American citizens and residents at the start of 1998.
In addition to HOPE, the other main measure provided for under US tax law for the relief of costs associated with higher education is the Lifetime Learning Credit. The HOPE tax credit differs from this measure partly in the sense that it is applied individually to students, rather than to the entire family, including spouses and dependents, of the taxpayer who is applying for the relief of the tax credit, as is the case with the Lifetime Learning Credit.
Members of a family as are thereby provided for cannot receive separate tax credits, and the amount provided to the family as a whole will not take account of how many members may be incurring costs for higher education. The HOPE tax credit is otherwise fairly similar to the Lifetime Learning Credit in the requirements which it imposes and the means through which it is administered, differing mainly in the sense that it is geared toward the individual needs of a student.
It should also be noted by people considering an application for a HOPE tax credit that it cannot be claimed in the same year alongside a Lifetime Learning Credit.
The maximum amount of relief which can be secured under the rubric of HOPE before 2008 came to an amount of $1,800. After that year, it was increased to $2,500. One way in which the HOPE tax credit provided by the government may be reduced is if the person claiming the exemption enjoys an income exceeding $48,000 and is single, or is married and has an income over $96,000.
Single people who earn more than $58,000 a year and married couples who together make over $116,000 will be completely ineligible to apply for a HOPE tax credit. Upon the finding that such conditions are present, the HOPE tax credit is generally applied to college students who are in their first or second years.
The expenses which can be offset under HOPE are those considered under the law to apply directly to the educational activities of the student, and as such may be considered to include tuition and textbooks, but do not include the costs of transportation or room and board.