Tax Credits and Deductions

You can claim tax credits or, in some cases, deductions, for expenses that you pay for post-secondary education for yourself, your spouse, or your dependent children.

Hope Tax Credit
A tax credit equal to all of the first $1,000 of tuition and fees (less scholarship, grants, and tax-free tuition benefits) and half of the next $1,000 of tuition and fees, for a maximum of $1,500 per student, is available to parents of dependent students or to students who are not claimed as a dependents on their parents' tax return. Beginning in 2002, the credit will be indexed for inflation. Refer to IRS Form 8863 for the maximum credit amounts for your 2002 tax return and beyond. The Hope credit can be claimed only for two tax years and applies only to the first two years of post-secondary education. Students must be enrolled at least half-time in a program that leads to a degree, certificate, or other educational credentials during at least one academic period that begins during the tax year. Students cannot have had a drug felony conviction in a year in which the credit applies.

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. Tax year 2003 is the most recent information currently available.

Tuition and Fees Tax Deduction
The Tuition and Fees Tax Deduction can reduce the amount of your taxable income by as much as $3,000 per year for tax year 2003. Starting in 2004, the maximum deduction increases to $4,000. This deduction is subtracted from your income, which means you can claim this deduction even if you do not itemize your deductions on Schedule A of Form 1040. This deduction may benefit you if you do not qualify for either the Hope or Lifetime Learning Education Tax Credits.

Future Scholar 529 College Savings Plan
This plan allows for families to save for college through a state-sponsored plan created under Section 529 of the Internal Revenue Code. These plans offer special tax benefits and have no income or age restrictions. Accounts can be used at almost any accredited school to pay for tuition, room, board, books, and computers. For more information, call 1-888-244-5674.

South Carolina Tuition Prepayment Program
This plan allows families to purchase an advance payment contract for tuition at a guaranteed level that can be used at public and accredited private colleges and universities. The program allows for federal tax deferral on contributions in accordance with IRS rulings. For more information, call 1-888-7SC-GRAD.

It is recommended that all taxpayers consult with their tax adviser, as each individual's tax situation is different. USC Upstate does not provide individual tax advice.

Contact Student Account Services with questions at 864-503-5326.

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