Taxpayer Relief Act of 1997

Overview of the Taxpayer Relief Act of 1997

The Taxpayer Relief Act of 1997 (TRA97), signed into law on August 5, 1997, could provide you an opportunity for educational tax benefits that can reduce your federal income taxes. TRA97 requires the University to report the name, social security number or taxpayer identification number, address, and enrollment status of each student to the Internal Revenue Service as a prerequisite to qualifying for any educational tax benefits. Listed below are sites that will explain TRA97 further.

Tax Credit Reporting Service (TCRS): The University of California has contracted with TCRS to provide services to assist the University in complying with the IRS 1098-T filing and reporting requirements. In addition TCRS provides a website www.1098-T.com from which students can obtain both generic information about the higher education tax credits and deduction as well as student-specific information, including a copy of Form 1098-T and the underlying details that support the financial data on that Form. From the www.1098-T.com website, students may also sign up to access their Form 1098-T electronically, rather than receive it via the U. S. mail, by providing their email address and consent. TCRS is available to answer questions about your Form 1098-T toll-free at 877-467-3821.

Frequently Asked Questions

Students and their families who believe that the educational tax benefit provisions of the Taxpayer Relief Act of 1997 (TRA97) may apply to them should consult a professional tax advisor or the federal publications on TRA97. The circumstances of each potential beneficiary of the TRA97 may vary. The employees of the University of California, Berkeley are not professional tax consultants and are not authorized to provide tax advice. The information below is intended only to notify students and their families of selected provisions of the TRA97.

Q: Which of these tax credits do I qualify for?

A: UC Berkeley is unable to provide you with tax advice or assist with strategies for filing your taxes. To determine your potential eligibility please consult your tax advisor or the Internal Revenue Service (IRS).

Q: Who is eligible to claim these tax credits?

A: The student or the taxpayer who claims the student as an exemption on his or her tax return is eligible to claim these tax credits. Married taxpayers must file jointly. The credits are based on payments made for tuition and certain related educational expenses.

Q: What are the eligibility requirements for the Hope Tax Credit?

A: To be eligible for the Hope Tax Credit, the student must have been:

(1) Enrolled in the first two years of postsecondary education;

(2) Enrolled in a program that leads to a degree, certificate, or other recognized educational credential;

(3) Enrolled at least half-time for at least one term that begins during the tax year;

(4) Free of any felony conviction for possessing or distributing a controlled substance.

Q: What are the eligibility requirements for the Lifetime Learning Tax Credit?

A: To claim the Lifetime Learning Tax Credit, a student must have been enrolled in one or more courses at an eligible educational institute. Graduate and undergraduate courses as well as courses that lead to improved job skills are eligible. Unlike the Hope Tax Credit, the student is not required to be enrolled at least half-time.

Q: Is the Lifetime Learning Tax Credit available for a student enrolled less than half-time or taking only one unit?

A: Yes. The Lifetime Learning Tax Credit is available for any coursework leading to a degree, certificate, or improved jobs skills.

Q: May a person claim both the Hope Tax Credit and the Lifetime Learning Tax Credit in the same year?

A: The Hope Tax Credit may be claimed for each eligible student who is listed as an exemption on a taxpayer's return. The Lifetime Learning Tax Credit may only be claimed once per taxpayer return, but out-of-pocket qualified education expenses paid for more than one eligible student may be calculated into the amount of a taxpayer’s allowable credit. Additionally, a taxpayer may claim the Hope Tax Credit and the Lifetime Learning Tax Credit in the same tax year, but not for the same student.

Q: Does TRA97 apply to payments made in 2006 for an academic term prior to 2006?

A: No. These credits can be claimed in tax year 2006 for educational expenses paid in 2006 for terms from January 1, 2006 to March 31, 2007

Q: What qualifies as tuition and related educational costs?

A: The term "qualified tuition and related expenses" means the tuition and fees an individual is required to pay in order to be enrolled at or attend an eligible institution. At UC Berkeley, this includes the campus fee, registration fee, educational fee, non-resident tuition, graduate professional student fees, and course materials fees. Generally, amounts paid for any course or other educational expense involving sports, games, or hobbies are not eligible for the tax credit. Charges and fees associated with room, board, student activities, athletics, health insurance, books, equipment, transportation, and similar personal, living, or family expenses are not qualified. The same definition of "qualified tuition and related expenses" applies to both the Hope and Lifetime Learning Tax Credits.

Q: What are "out of pocket" expenses?

A: The money that you or the person claiming you as a dependent pays towards your qualified tuition and related expenses minus any non-taxable grants, scholarships, or fee waivers that you receive. For example, Pell grants, Cal grants, SEOG, institutional waivers and scholarships may reduce the expenses you may claim for these tax credits. Student Loans are considered out-of-pocket funds because the borrower is required to pay them back. Taxable Grants are also considered out of pocket funds because the individual receiving these grants must pay taxes on them.

Q: What are the first two years of postsecondary education?

A: UC Berkeley considers the first two years of postsecondary education to be the first 60 semester units minus any advanced placement units.

Q: What constitutes half-time enrollment?

A: At UC Berkeley, half-time enrollment is 6 1/2 semester units for undergraduate students and 6 units for graduate students.

Q: How will I be notified of my eligible expenses?

A: UC Berkeley has contracted the services of a vendor, Tax Credit Reporting Service (TCRS), a division of Affiliated Computer Systems (ACS), to provide 1098-T and 1098-T Supplemental Forms to UC Berkeley students. The 1098-T Form lists the student's social security number or Taxpayer Identification Number (TIN), name, address, enrollment status regarding whether or not the student was enrolled at least half-time and whether or not the student was enrolled exclusively as a graduate student. The 1098-T Supplemental Form will list all qualified educational expenses paid, gift aid, and fee reductions. Form 1098-T information is available on line or via email, mail, or fax.

Q: Is there a faster way to obtain a copy of my 1098-T?

A: Yes! The vendor has implemented a web site and a customer service call center to provide forms and information to UC Berkeley students. You can print a copy of your 1098-T and Supplemental Form by logging on to http:// www.1098-T.com/. You may also request a copy to be faxed to you by contacting the Tax Credit Reporting Service Call Center at 1-877-467-3821.

Q: What if I only attend UC Extension or Summer Session?

A: Berkeley will be reporting information on students who attend University Extension and Summer Session.

Q: Does the Student Loan Interest Deduction allow students to deduct capitalized interest from their adjusted gross income?

A: Yes. Capitalized interest is still considered interest regardless of the fact that it has been added to the loan principal. Thus, it may be claimed as part of the Student Loan Interest Deduction.

Q: Can the Student Loan Interest Deduction be taken for interest that is paid on unsubsidized loans while a student is still in school?

A: Yes. If you made interest payments in 2002 and after, the interest deduction allowed is all interest paid on the unsubsidized loans during the year-- both required and voluntary payments.

Q: I would like to claim the Student Loan Interest Deduction on my 2006 tax return and I need to know how much I have paid in interest on my student loan. How can I get that information?

A: You may obtain this information by contacting your lender.

Q: What is the Deduction for Higher Education Expense?

A: The Deduction for Higher Education Expenses Provision of TRA is an "above the line" deduction available to filers whose Modified Adjusted Gross Income (MAGI) is too high to claim either the Hope or Lifetime Learning Credit.

Q: What are the eligibility requirements?

A: Qualified educational expenses are generally the same as they are for the Hope Scholarship. However, unlike the Lifetime Learning Credit, the courses taken by the filer need not be a part of a program related to job skills. In addition, filers who claim the new Deduction for Educational Expenses cannot also claim a Hope or a Lifetime Tax Credit for the same educational expenses. In other words, in any given tax year, eligible taxpayers may claim either a Hope or Lifetime Tax Credit or the new education tax deduction, but not both with respect to educational expenses for same student.

Q: Can the Form 1098-T or Supplemental Form A be used for purposes other than tax credits of the Education for Higher Education Expense?

A: ABSOLUTELY NOT! Both the 1098-T and Supplemental Form A contain ONLY qualified fees paid by the student. Other fees paid are not included. Use the 1098T and Supplemental Form A ONLY for Hope Scholarship, the Lifetime Learning Credit, and/or the Deduction for Higher Education Expense; otherwise you may face problems with challenges from the IRS in the event you are audited. See www.irs.gov.

TRA97 List of Resources and Related Web Sites.

This web page will be updated as more information becomes available. If you wish to learn whether you or your parents are eligible for these new tax benefits, or if you just desire additional information on TRA97, please consult your tax advisor, federal publications on TRA97, http://www.ed.gov/ or the Internal Revenue Service.  

Address CHANGES

Current and returning UCB students update their addresses at http://bearfacts.berkeley.edu. Alumni and former students must submit a signed and dated request to update their address to University of California, Office of the Registrar, 120 Sproul Hall #5404, Berkeley, CA 94720-5404; fax: 510-643-4222.

UC Berkeley Extension students must submit updated information in writing, signed and dated by the student, to Academic and Student Records, UC Berkeley Extension, Suite 110, 1995 University Avenue #7020, Berkeley, CA 94720-7020; fax: (510) 643-2333.

This page last updated on July 12, 2007