February 15, 1999 Vol. III, No. 10

CSUN Students Receive Federal Tax Credit Notices

Two New Programs Apply for 1998 Taxes, but Many Cal State Students Won't Qualify

More than 40,000 students who took credit classes at Cal State Northridge during 1998 are receiving federally required notices that they may be eligible for either of two new federal tax credits this year for qualified higher education expenses.

To assist students with information about the potential credits, the mailings arranged by the university include the new IRS 1098-T form that documents students' university enrollment and includes sources for more information about the new Hope Scholarship and Lifetime Learning tax credits.

University Controller Robert Kiddoo, however, cautioned that perhaps only 5 to 10 percent of CSUN or other Cal State students will qualify for the credits because of the CSU's comparatively low state university fee structure and the significant numbers of students who receive financial aid, grants and scholarships.

Kiddoo suggested that students and/ or their parents consult their tax advisors about the new federal programs, because program rules are somewhat complicated. Kiddoo also noted that CSUN departments such as Admissions and Records and Financial Aid cannot provide students with tax credit advice.

The information provided students in the university mailing includes limited data about the two new federal tax credit programs and provides sources for the related Internal Revenue Service publications and forms about the programs, available via the Internet or by telephone request.

In addition, a university vendor has established a web site-www.gsd2 .ncs.com/tra/-with additional general information about the programs. The same vendor also provides a toll-free general information line for CSUN students: 1-(800)-223-0043.

However, at least for this initial year of the programs, Kiddoo said neither students' 1098-T forms nor the campus will report individual students' payments and/or scholarship information. Students and/or their parents each have a unique tax circumstance and will need to determine those amounts from their own financial records.

Both the Hope Scholarship and the Lifetime Learning tax credits were adopted by Congress as part of the Taxpayer Relief Act of 1997, which took effect during calendar year 1998. Thus the first potential use of the credits will be with the federal tax returns due by April 15, 1999.

The Hope Scholarship provides a tax credit of up to $1,500 for a student who is enrolled at least half-time during an academic period, such as a semester, that began during that calendar year. The program applies to students in one of the first two years of postsecondary education.

The amount of the credit is 100 percent of the first $1,000 spent plus 50 percent of the next $1,000 spent for a student's qualified tuition and other expenses that must be paid to the university as a condition of attendance. The credit may be claimed for only two taxable years for each eligible student.

The Lifetime Learning program this year provides a credit of up to $1,000 per family-20 percent of the first $5,000 paid for qualified postsecondary tuition and related expenses from July through December 1998 for any eligible students in a family. This program is aimed at juniors, seniors, graduate and working part-time students.

The IRS publication on the programs states: "Fees for course-related books, supplies and equipment, and student activity fees are included in qualified tuition and related expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Qualified tuition and related expenses do not include the cost of insurance, medical expenses...room and board, transportation or similar personal, living or family expenses...."

For both programs, students' eligible expenses also are reduced by grant and scholarship awards and other forms of tax-free educational assistance. Such aid can include Pell Grants and veterans' educational assistance. Thus students not receiving such aid have a greater likelihood of qualifying.

And, the two programs have income restrictions. To potentially qualify, a person's 1998 modified adjusted gross income must be no larger than $50,000 for single filers, and no larger than $100,000 for those who are married and filing a joint tax return.

The U.S. Education Department estimates ultimately that more than 13 million students in the U.S. could gain tax benefits totaling $9.5 billion from the two programs each year, including more than 2 million students in California with a value in the state of $1.5 billion.

-John Chandler


February 15, 1999

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