Overview of Taxpayer Relief Act of 1997-https://cgi.ecsi.net/bwr/tra97.html (full text of Tax Payor Relief Act- http://www2.ed.gov/PDFDocs/hr2014.pdf)

Interactive Tax Assistant https://www.irs.gov/uac/Interactive-Tax-Assistant-(ITA)-1 (You can create a my Social Security account (https://www.ssa.gov/myaccount/) to access your Social Security Statement to check your earnings and get your benefit estimates. https://www.ssa.gov/pubs/EN-05-10540.pdf) The Taxpayer Relief Act of 1997 (TRA97) introduced several tax incentives on qualifying student loans. The Hope and Lifetime Learning credits provide the ability to take a tax credit for qualifying educational expense. TRA also provides a deduction for the interest paid on qualifying student loans. The Student Loan Interest Deduction is reported on an IRS Form 1098-E (PDF). The Hope and Lifetime Learning Credits are reported on an IRS Form 1098-T (PDF). This document deals with both the 1098-E Student Loan Interest Deduction and the 1098-T Education Tax Credit. Hope Scholarship Credit (1098-T) Beginning January 1, 1998, taxpayers may be eligible to claim a non-refundable Hope Scholarship Credit against federal income taxes. The Hope Scholarship 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 post-secondary 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 of the first $1,100 of the taxpayer's out-of-pocket expenses for each student's qualified tuition and related expenses, plus (2) 50 percent of the next $1,100 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 $1,650 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 Credit is gradually reduced for taxpayers who have modified adjusted gross income between $47,000 ($94,000 for married taxpayers filing jointly) and $57,000 ($114,000 for married taxpayers filing jointly). Taxpayers with modified adjusted gross income over $57,000 ($114,000 for married taxpayers filing jointly) may not claim the Hope Scholarship Credit. The Hope Scholarship Credit may be claimed for payments of qualified tuition and related expenses made on or after January 1, 1998 for academic periods beginning on or after January 1, 1998. Therefore, the first time taxpayers will be able to claim the credit is when they file their 1998 tax returns in 1999. The Hope Scholarship Credit is not available for any amount paid in 1997. Lifetime Learning Credit (1098-T) Beginning on July 1, 1998, taxpayers may be eligible to claim a non-refundable Lifetime Learning Credit against their federal income taxes. The Lifetime Learning Credit may be claimed for the qualified tuition and related expenses of the students in the taxpayer's family (i.e., the taxpayer, the taxpayer's spouse, or an eligible dependent) who are enrolled in eligible educational institutions. Through 2002, the amount that may be claimed as a credit is equal to 20 percent of the taxpayer's first $5,000 of out-of-pocket qualified tuition and related expenses for all the students in the family. After 2002, the credit amount is equal to 20 percent of the taxpayer's first $10,000 of out-of-pocket qualified tuition and related expenses. Thus, the maximum credit a taxpayer may claim for a taxable year is $1,000 through 2002 and $2,000 thereafter. These amounts are not indexed for inflation. If the taxpayer is claiming a Hope Scholarship Credit for a particular student, none of that student's expenses for that year may be applied toward the Lifetime Learning Credit. The amount a taxpayer may claim as a Lifetime Learning Credit is gradually reduced for taxpayers who have modified adjusted gross income between $47,000 ($94,000 for married taxpayers filing jointly) and $57,000 ($114,000 for married taxpayers filing jointly). Taxpayers with modified adjusted gross income over $57,000 ($114,000 for married taxpayers filing jointly) may not claim a Lifetime Learning Credit. The definition of modified adjusted gross income is the same as it is for the purposes of the Hope Scholarship Credit. The Lifetime Learning Credit may be claimed for payments of qualified tuition and related expenses made on or after July 1, 1998, for academic periods beginning on or after July 1, 1998. Therefore, the first time taxpayers will be able to claim the credit will be when they file their 1998 tax returns in 1999. The Lifetime Learning Credit is not available for any amount paid in 1997. Student Loan Interest Deductions (1098-E) ECSI provides borrowers with an IRS Form 1098-E to report the amount of interest which may be deductible. This interest may be declared on either IRS Form 1040 or Form 1040A. You are not required to itemize to receive the deduction. The maximum amount of a deduction in one year is: $1,500 in 1999, $2,000 in 2000 and $2,500 in 2001 and beyond. Deductions prior to the 2002 tax year were limited to only the first 60 months of repayment, but need not be consecutive. In tax year 2002, the 60 month limitation was lifted. There are also limits to your adjusted gross income which may influence the amount of a deduction you may take. The amount of your deduction will be gradually reduced if your modified adjusted gross income is between $55,000 and $70,000 ($110,000 and $140,000 if you file a joint return). You will not be able to take a deduction if your modified adjusted gross income is $70,000 or more ($140,000 or more if you file a joint return). Your educational institution is required to send an IRS Form 1098-E if you pay more than $600 in interest for any tax year. ECSI provides a 1098-E regardless of the amount of interest paid during the tax year unless your school opts out of this process. ECSI also takes into account the 60 month limitation for tax years prior to 2002. All tax information is submitted electronically to the IRS. Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or a dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education. What is the tax benefit of the tuition and fees deduction? The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if you cannot take either the Hope or lifetime learning credit because your income is too high. Tax Advice ECSI can provide replacement forms or information on the method used to compute eligible interest payments, but we cannot provide tax advice. If you have any questions about if or how much interest you can deduct, you should consult with a qualified tax professional or contact the IRS Taxpayer Assistance line at 1-800-829-1040. The IRS web site has many documents concerning TRA-97, including some self-help topics for tax filers. See the list of links below for a more comprehensive list. Additional Resources Below are several resources that provide additional information concerning the student loan interest deduction, and the Taxpayer Relief Act of 1997. These documents or sites are not maintained by ECSI and we cannot be responsible for their content. Overview of tax benefits - Paying for College: Tax Benefits and Savings Options - courtesy of National Association of College and University Business Officers (NACUBO) Instructions for Forms 1098-E and 1098-T (PDF) Instructions for Form 8863 -- Education Credits (PDF) Tax Information for Students IRS Publication 970 (PDF): Tax Benefits for Higher Education. IRS Notice 97-60 provides many questions and answers concerning the education tax incentives. IRS Tax Trails on Student Interest will walk you through a series of questions to see if you're qualified to take the deduction. The IRS periodically releases bulletins or notices. These documents may also be useful: 98-54, 99-37 (PDF) IRS Main Site Taxpayer Relief Act of 1997 (full-text) IRS Form W-9S "Request for Student's or Borrower's Social Security Number". (PDF)