Extending a lifetime of hope.

Byline: Mark Bilotta

COLUMN: As I see it

The extended recession and an unemployment rate hovering around 10 percent have prompted thousands of individuals and families to examine their employment and training options. Individuals are looking for new job opportunities which may require retraining and, in many cases, higher education.

To help offset the costs of higher education, whether it's a short-term certificate program, associate's or bachelor's degree program, education tax credits may be an attractive lure. Keep in mind that a tax credit reduces the amount of income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself.

Back in 1997, the federal Taxpayer Relief Act provided for the Hope Scholarship and Lifetime Learning Credits as a means of opening the doors of college to a new generation, with the largest investment in higher education since the 1956 G.I. Bill.

Eligibility for these tax credits is driven, in part, by income. For tax years 2009 and 2010, your modified adjusted gross income (MAGI) must be less than $90,000 ($180,000 if married and filing jointly) to claim the Hope credit and less than $60,000 ($120,000 if married and filing jointly) for the Lifetime credit.

If you are income eligible, the tax credit could mean up to $2,500 (Hope) or up to $2,000 (Lifetime Learning) a year. However, you cannot claim both tax credits for the same individual student.

Paid qualified education expenses are tuition and certain related expenses needed for a course of study, such as books, supplies and equipment. Qualified education expenses do not include amounts paid for room and board, insurance, medical expenses (including student health fees), transportation or similar personal, living or family expenses.

It is worth noting that you can claim either of these tax credits for qualified education expenses paid with the proceeds of a loan. You use the expenses to figure the tax credit for the year in which the expenses are paid, not the year in which the loan is repaid.

Also of note, and a recent change, is that generally, 40 percent of the Hope credit is now a refundable credit, which means that you can receive up to $1,000 even if you owe no taxes.

To claim the credits on your annual tax return, using Form 8863, the student for whom you pay qualified education expenses, whether for yourself, your spouse or a dependent, must meet certain eligibility requirements. The Hope credit, for example, can now be claimed for the first four years of postsecondary education. A student must be enrolled in an undergraduate degree or other recognized education credential at least half-time for at least one academic period during the year.

The Lifetime Learning credit, on the other hand, is available for all years of postsecondary education (undergraduate and graduate) and for courses to acquire or improve job skills. A student does not need to be pursuing a degree or other recognized education credential and could be eligible when enrolled in just one or more courses.

Educating the public about these tax credits is important and can lead to some amazing results. I'm reminded of how successful the Worcester Earned Income Tax Credit Coalition has been in recent years. This active collaboration with the city of Worcester and Worcester Community Action Council has included invaluable volunteers from UNUM, AllCom Credit Union, Plumley Village, Main South CDC, the United Way of Central Massachusetts, and a number of higher-education partners, including students and professors from Assumption College, Worcester State College, Quinsigamond Community College and the College of the Holy Cross. Through their efforts with free income tax preparation, the coalition helped more than 1,000 Worcester area residents receive more than $1.2 million in additional refunds this year. That's real money back in the hands of area residents.

In the end, promotion of these education tax credits will help thousands of families adjust to this challenging economy by better positioning them financially as they attempt to transition in the employment market. Help spread the word.

Mark Bilotta is the chief executive officer of the Colleges of Worcester Consortium Inc., board chairman for the United Way of Central Massachusetts, and vice- chairman of the Massachusetts Health and Educational Facilities Authority.