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The Hope tax credit is an education reimbursement given to a taxpayer who is paying for post-secondary education. The tax credit is set up as the Hope Scholarship, the size of which is determined each year. The tax credit is only extended during the first four years of higher education. For example, in 2009, the Hope Scholarship provided 100% reimbursement on the first $2,000 of qualified tuition per student per tax payer. This is given to those individuals who qualify based on the income reported.
The Hope credit was expanded through the American Recovery and Reinvestment Act in 2009. The maximum tax credit amount is $1800 and $3600 for Midwestern disaster areas. The expansion was determined to be temporary to encourage more investment in higher education in 2009 and 2010. President Barack Obama aimed to make these changes permanent including:
- Increasing the amount of the scholarship
- Increasing the length of the scholarship
- Increase the income phase outs
- Add course materials to expenses
- Extend refund to low-income students without tax liability
The credit is not a student loan; it is solely a tax reimbursement for tuition expenses for those who qualify based on income.
