Educational Tax Benefits Q&A

An Educational Tax Credit directly reduces the amount of your Federal Income Tax. You can report this directly on your IRS Form 1040 or 1040A Income Tax Return without itemizing expenses. You will be required to complete and attach IRS Form 8863 "Education Credits (Hope and Lifetime Credits)" to your Tax Return in order to claim either the Hope Scholarship Tax Credit or the Lifetime Learning Tax Credit.

These new Educational Tax Credits are a result of the Taxpayer Relief Act of 1997.

HOW CAN I CLAIM AN EDUCATIONAL TAX CREDIT?

If you think you are qualified to claim a Tax Credit:

Keep receipts of your Tuition/Fee payments for your own records during each calendar year (see Qualified Payments). NAU will also provide a summary of your tuition payments after the end of each calendar year.
Complete Form W-9S, only if your NAU ID Number is NOT the same as your Social Security Number.

Form W-9S is available from NAU The Office Of The Bursar, NAU Website, or the IRS - See "Resources & Links"

Please Note: If you complete Form W-9S, you MUST attach a copy of your social security card and send it to NAU - Do Not Send To The IRS!

NAU will send you a Form 1098-T (Tuition Paid) by February 1, along with a Summary of your Past Year's Tuition/Fees Payments to your Permanent NAU Address. (Each school attended should send a separate Form 1098-T.)
Submit these forms and tuition summary to your Tax Consultant OR If you are preparing your own income tax return, follow the directions in your Form 1040 or Form 1040A Instruction Booklet. You will be required to attach Form 8863 "Education Credits (Hope and Lifetime Credits)" to your Tax Return in order to claim these credits.

WHAT ARE THE REQUIREMENTS FOR THE HOPE SCHOLARSHIP TAX CREDIT?

You must be a Freshman or Sophomore within the first two academic years of your postsecondary education, in an Accredited Higher Education Institution (for example: NAU).
You must be enrolled in a degree-seeking program.
You must be at least a half-time student for a minimum of one semester during the tax year involved.
You must be free of any felony conviction for possession/distribution of a controlled substance.
You must file a joint income tax return if you are married.
Your Adjusted Gross Income must be less than $42,000 ($85,000 filing jointly) for full Credit; or between $42,000 to $52,000 (jointly $85,000 to $105,000) the Tax Credit decreases; over $52,000 (jointly $105,000) there is NO Tax Credit.
You may only claim this credit for tuition/fee payments made on or after January 1, 1998.
You may claim up to $2,000 per student (20% of the first $10,000, paid) for qualified tuition/fees.

WHAT ARE THE REQUIREMENTS FOR THE LIFETIME LEARNING TAX CREDIT?

You must be enrolled in an Accredited Higher Education Institution (for example: NAU).
Your courses must be applied either toward a degree program OR toward improving or developing job skills.
You must file a joint income tax return if you are married.
Your Adjusted Gross Income must meet the same requirements as the Hope Scholarship Tax Credit (see above).
You may be enrolled in undergraduate or graduate level classes.
You may claim this credit for tuition/fee payments made on or after July 1, 1998.
You may claim up to $2,000 per credit return (20% of first $10,000 paid) for qualified tuition/fees.
You may not claim the Lifetime Learning Tax Credit if you are already claiming the Hope Scholarship Tax Credit.

WHAT IS THE DIFFERENCE BETWEEN THE HOPE SCHOLARSHIP TAX CREDIT AND THE LIFETIME LEARNING TAX CREDIT?

Basically, the Hope Tax Credit is only available to Freshmen and Sophomores (students within the first two academic years of their post-secondary education). The Lifetime Tax Credit is for anyone, including graduate students, taking post-secondary courses, which are applied either toward a degree program or toward job-related skills.

The Hope Tax Credit has more requirements than the Lifetime Tax Credit (See individual descriptions above).

WHAT IS A STUDENT LOAN INTEREST DEDUCTION AND WHAT ARE THE REQUIREMENTS?

You must have been at least a half-time student and enrolled in a degree-seeking program.
You must have used this Student Loan only for Qualified Educational Expenses, including: Tuition, Fees, Room, Board, Books, Equipment, Transportation, and other education-related expenses.
Your Adjusted Gross Income must be less than $50,000 ($100,000 if married filing jointly) for full Deduction; or between $50,000 to $65,000 (jointly $100,000 to $130,000) the Deduction decreases; over $65,000 (jointly $130,000) there is no Deduction.
You must file a joint income tax return if you are married.
You must not be claimed as a dependent by another taxpayer. You may be able to deduct up to $2,500 of interest you paid.
You may claim up to $2,500 per taxpayer for interest payments on Qualified Student Loans.
You may claim this deduction in addition to the Hope Tax Credit or the Lifetime Learning Tax Credit.

HOW CAN I CLAIM A STUDENT LOAN INTEREST DEDUCTION?

If you think you are qualified to claim a Student Loan Interest Deduction:

Keep receipts of your Student Loan Interest Payments for your own records during each calendar year. (Most loan institutions include your total interest paid on your payment statements.)
Complete Form W-9S, Only if your NAU ID Number is NOT the same as your Social Security Number.

Form W-9S is available from NAU The Office Of The Bursar, NAU Website, or the IRS - See "Resources & Links"

Please Note: If you complete Form W-9S, you MUST attach a copy of your social security card and send it to NAU - Do Not Send To The IRS!

If you paid $600 or more in interest, then you will be provided with a Form 1098-E by February 1.
Submit these forms and interest summary to your Tax Consultant OR If you are preparing your own income tax return, follow the directions in your Form 1040 or Form 1040A Instruction Booklet.

WHAT IS FORM 1098-T?

IRS Form 1098-T is required to claim your Hope Scholarship Tax Credit, Lifetime Learning Tax Credit or Tuition and Fees Deduction if you are eligible.
IRS Form 1098-T is provided to all (U.S. citizen) students as a requirement of the Taxpayer Relief Act of 1997. All post-secondary schools must provide this information to the Internal Revenue Service, so that students (or taxpayers claiming students as dependents) may claim part of their tuition as an Educational Tax Credit on their Federal Income Tax Return. Beginning in tax year 2002, the IRS does not require post secondary schools to provide or report a 1098-T if total gift aid exceeds tuition.
The top third of the page you receive from NAU is your copy of IRS Form 1098-T. NAU also sends this information directly to the IRS. Do not attach this copy to your Federal Income Tax Return. Beginning tax year 2003, amounts will be reported to the IRS.
*NOTE: NAU reports payment received (Box #1) rather than billed amount.
The bottom two-thirds of the page is a Summary of your Tuition Payments for the past tax year – This information is NOT reported to the IRS – It is provided only to assist you in determining your Educational Tax Credit. The summary includes your Total Tuition Paid, Gift Aid for the past tax year and any prior year adjustments.

WHAT IS FORM 1098-E?

IRS Form 1098-E is required to claim your Student Loan Interest Deduction, if you are eligible.
IRS Form 1098-E is provided to all (U.S. citizen) students IF they paid $600 or more interest on student loans to a student loan institution. This is a requirement of the Taxpayer Relief Act of 1997. NAU only records interest paid for Chauncey Loans and Pittman Loans. All other loans are serviced by other loan institutions.
All post-secondary student loan institutions must provide this information to the Internal Revenue Service, so that students (who are NOT claimed as dependents of other taxpayers) may deduct a part of their interest from their Adjusted Gross Income on their Federal Income Tax.
If you receive this form from NAU, the top third of the page is your copy of IRS Form 1098-E. NAU also sends this information directly to the IRS. Do not attach this copy to your Federal Income Tax Return.
The bottom two-thirds of the page is a Summary of your Interest Payments for the past tax year – This information was NOT reported to the IRS – It is provided only to assist you in calculating your Student Loan Interest Deduction.

WHAT IS FORM W-9S? WHO MUST COMPLETE THIS FORM?

IRS Form W-9S is an IRS Form which you must complete and return to NAU (and any other educational institution that you attended during the tax year) for any of the following reasons:

Your NAU ID Number is NOT the same as your Social Security Number.

Form W-9S is available from the Office Of The Bursar, NAU Website, or the IRS - See "Resources & Links"

Please Note: If you complete Form W-9S, you MUST attach a copy of your social security card and send it to NAU - Do Not Send To The IRS!

WHAT OTHER TAX FORMS DO I NEED AND WHERE CAN I OBTAIN THEM?

IRS Form 1040 or 1040A "U.S. Individual Income Tax Return" and Instruction Booklet
IRS Form 8863 "Education Credits (Hope and Lifetime Learning Credits)"
IRS Form W-9S ONLY if you use an NAU ID number which is NOT your Social Security number

See "Resources and Links: Tax Forms, Information, Assistance" to obtain IRS Forms or Publications
Form W-9S can be mailed to you from NAU – or printed from our the Office Of The Bursar Website.

HOW DO I QUALIFY FOR AN EDUCATIONAL TAX CREDIT?

Generally, you may qualify for the Hope Scholarship Tax Credit IF you meet ALL of the following:

You were within your first two academic years at the beginning of the tax year (i.e. Freshman or Sophomore).
You were at least a half-time student sometime during the tax year.
You were involved in a program leading to a degree or certificate.
Your Adjusted Gross Income for the tax year was less than $52,000 single or $105,000 married filing jointly. [See Summary Table]

Generally, you may qualify for the Lifetime Learning Tax Credit IF:

Your Adjusted Gross Income for the tax year was less than $52,000 single or $105,000 married filing jointly. [See Summary Table]
Course(s) must EITHER be a part of a postsecondary degree program OR a non-degree program taken by the student to acquire or improve job skills.
No Other Requirements:

NO minimum number of hours required

NO degree requirements

NO classification requirements – You may be a Graduate OR Undergraduate student

NO felony drug conviction restriction

You must determine your eligibility for the Educational Tax Credit yourself OR contact your personal tax advisor.

**** NAU cannot assist you with this personal decision! ****

WHAT ARE QUALIFIED TUITION/FEE PAYMENTS?

Qualified Tuition/Fee payments are fees which are required to attend NAU: In-state Tuition, Out-of-state Tuition, Special Class Fees, Recreation Bond Fee, Financial Aid Trust Fee, Arizona Student Association (ASA) Fee, Information Technology Fee.
Qualified Payment methods include: Cash, Checks, Credit Cards, Student Loans, Trust Funds, Third Party Sponsors, Tuition Payment Plan, any Taxable Disbursements.
Non-Qualified Payment methods include: Scholarships, Grants, Waivers, Employer Provided Assistance, Veterans or Armed Forces Assistance, Any Educational Assistance Excludable from Gross Income.
Fees which are NOT Qualified Payments include: Late Fees and Insurance Premiums. (Also not qualified: books, housing, meals, transportation, or other expenses).
Course-related books and/or equipment are NOT qualified UNLESS NAU requires students to purchase those items directly from NAU and ONLY from NAU.

I TOOK A CONTINUING EDUCATION COURSE/WORKSHOP AT NAU. WILL I RECEIVE A 1098-T FOR THIS?

Per IRS regulations, institutions such as NAU are not required to issue a 1098-T for any amounts paid for non credit courses. Students will need to rely on other records to substantiate their claim for an education credit.