Beginning January 1, 1998, taxpayers are eligible to claim a nonrefundable Hope Scholarship Credit against their federal income taxes. The Hope Scholarship Tax Credit may be claimed for the qualified tuition and related expenses of EACH student in the taxpayer's family (i.e., the taxpayer, the taxpayer's spouse, or an eligible dependent) who is enrolled at least half-time in one of the first two years of postsecondary education and who is enrolled in a program leading to a degree, certificate, or other recognized educational credential. The amount that may be claimed as a credit is generally equal to: (1) 100 percent off the first $1,000 of the taxpayer's out-of-pocket expenses for each student's qualified tuition and related expenses, plus (2) 50 percent of the next $1,000 of the taxpayer's out-of-pocket expenses for each student's qualified tuition and related expenses. Thus, the maximum credit a taxpayer may claim for a taxable year is $1,500 multiplied by the number of students in the family who meet the enrollment criteria described above. 

The amount a taxpayer may claim as a Hope Scholarship Tax Credit is gradually reduced for taxpayers who have modified adjusted gross income between $42,000 ($85,000 for married taxpayers filing jointly) and $52,000 ($105,000 for married taxpayers filing jointly). Taxpayers with modified adjusted gross income of $52,000 or more ($105,000 for married taxpayers filing jointly) may not claim the Hope Scholarship Tax Credit. 

To claim the Hope Scholarship Tax Credit, complete IRS Form 1040 or 1040A and attach IRS Form 8863 "Education Credits (Hope and Lifetime Credits)" which directs you in the calculation of the credit.