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MBA TAX CREDITS

There are two tax credits available to MBA students.  Because these are credits and not “tax deductions,” you will receive the full amount of any credit you qualify for as a tax return.

(1) The Hope Tax Credit

This is usually referred to as the “Hope Scholarship Credit,” which is a little misleading because it isn’t a scholarship; it’s a tax credit.

This credit has been in the news lately, so you may have heard about it.  Unfortunately, it’s only for students who are in their first or second year of undergraduate studies (but not in subsequent years), so it doesn’t apply to you.

While you don’t qualify for the Hope Tax Credit, you probably will qualify for the Lifetime Learning Tax Credit discussed on the following page.  

(2) Lifetime Learning Tax Credit

While the Hope Tax Credit can be claimed only for students in their first and second years of undergraduate studies, the Lifetime Learning Tax Credit can be claimed for students in any year of study, which makes it appropriate for a lot of graduate students. 

You can claim this credit for yourself, your spouse or your dependents.  The credit is calculated by summing your tuition and related expenses, those of your spouse and those of all your dependents.

How Much Credit Can I Claim? 

From July 1, 1998 through 2002

You can claim 20 percent of the first $5,000 of qualified tuition and expenses for all students in your family.  That makes the maximum Lifetime Learning Tax Credit $1,000 a year through the year 2002.

Beginning in 2003

You can claim 20 percent of your first $10,000 of qualified tuition and expenses for all students in the family.  That makes the maximum Lifetime Learning Tax Credit $2,000 a year beginning in the year 2003.  As with the Hope Tax Credit, not everyone qualifies for the Lifetime Learning Tax Credit.

Who Qualifies for the Lifetime Learning Credit? 

To take the full credit, your family income needs to be below a certain level.  The cut-off levels for the Lifetime Learning Tax Credit are exactly the same as those for the Hope Tax Credit.

The Lifetime Learning Tax Credit will not be indexed to inflation.

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