How do I claim the Hope credit?
You can claim the Hope credit by using Form 8863, which should then be attached to your tax return, if: (i) you have paid qualified tuition expenses for an eligible student during the tax year; (ii) the student had not yet completed his or her first two years of post-secondary study; (iii) the student was enrolled for at least half of a full-time load of courses in a degree program; and (iv) you have not claimed it twice before for this student. For the 2006 tax year, you can claim a credit up to $1,650 for relevant expenses.
To calculate the exact amount you can claim for the Hope credit, you claim 100% of the first $1,100 of applicable tuition expenses, and 50% of the next $1,100 of applicable expenses. For example, if you only had $600 of expenses, you can claim a Hope credit of $600. If you have $1,200 of expenses, your Hope credit would be for $1,150 (100% of the first $1,100 plus 50% of the last $100).
There are two other things to note. First, you cannot claim the Hope credit for a student if you are intending to claim the lifetime learning credit for that same student - you can claim one or the other, but not both. Second, if your modified adjusted gross income is above a certain amount, a phaseout applies, further limiting the amount you can take for the Hope credit.