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Tax credits give
some college
students Hope

By Susan Kreifels
Star-Bulletin

Randy Sabado, a full-time student in his second semester at Honolulu Community College, works part time to help pay for school. But to his surprise, a federal tax break is allowing him to attend the community college virtually tuition-free.

It's called the Hope tax credit. Any student, or parents supporting the student, can claim up to $1,500 on tuition and fees paid for each of the first two years of college or vocational school.

For Sabado, 25, it meant an extra $1,000 in tax credits.

"It will help me pay bills or I might invest it in an IRA," said Sabado, who is studying industrial education to be a shop teacher.

The tax credit, which took effect in 1998, can be claimed by students enrolled at least half-time in their first two years of studies at eligible education institutions, or parents who claim the students on their tax forms. The credit, which directly reduces the amount of federal income taxes owed, is meant to help working and middle-income families and students, according to the U.S. Department of Education.

Covers much of tuition

The credit is 100 percent of the first $1,000 pay for qualified tuition and fees, less any tax-free grants and scholarships, and 50 percent of the second $1,000.

In Hawaii, as well as other states, the tax credit could virtually cover the tuition and fees at community colleges and help considerably at universities. Tuition at community colleges here, for example, is $1,052 for two semesters. With $1,000 in tax credits, that means students could end up paying only $52 for the full year.

The Lifetime Learning tax credit picks up where Hope leaves off. It's available to all students -- vocational, undergraduate, graduate and professional -- as well as adults who take as least one job-related course to upgrade their job skills or learn new ones. They can claim up to $1,000 per tax year, or 20 percent of the first $5,000 paid in tuition and fees.

Both tax credits are phased out for joint filers who earn between $80,000 and $100,000 of adjusted gross income, and for single filers earning between $40,000 and $50,000. For example, the U.S. Department of Education said a married couple with an adjusted gross income of $60,000 and two children in college could cut their taxes by up to $3,000 using the Hope tax credit.

Resident aliens eligible

David Cleveland, a Honolulu Community College sociology professor, is concerned that Hawaii students have not received the word. One of his classes surveyed 309 liberal arts students last December and found 60 percent of them didn't know about the Hope tax credit. Cleveland said it also applies to resident alien students who pay taxes.

Cleveland held a recent information seminar on the tax credits and the community college has put out multilingual fliers. But he worries the information is not getting out on other UH campuses. And he believes high school educators are unaware as well.

"Students just aren't learning of this, and I can't understand it," Cleveland said. "It's like a rebate on a car."

"There are posters at every college I go to on the mainland. I'm tired of watching my students not receive these tax credits."

Cleveland said students who didn't claim either of the credits for 1998 and 1999 can still do so by filling out Form 8863 and a 1040X to amend their tax returns.