Part III. Administrative, Procedural, and Miscellaneous

penses of his/her spouse and other eligible dependents (including children) for whom the dependency exemption is claimed. Generally, a parent may claim the dependency exemption for his/her unmarried child if: (1) the parent supplies more than half the child’s support for the taxable year, and (2) the child is under age 19 or is a full-time student under age 24. Q3: What are the eligibility requirements

for the student? A3: A student is eligible for the Hope

Scholarship Credit if: (1) for at least one academic period (e.g., semester, trimester, quarter) beginning during the calendar year, the student is enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential and is enrolled in one of the first two years of postsecondary education, and (2) the student is free of any conviction for a Federal or State felony offense consisting of the possession or distribution of a controlled substance. For purposes of the Hope Scholarship Credit, a student will be considered to be enrolled at least half-time if the student is enrolled for at least half the full-time academic workload for the course of study the student is pursuing as determined under the standards of the institution where the student is enrolled. The institution’s standard for a full- time workload must equal or exceed the standards established by the Department of Education under the Higher Education Act and set forth in 34 C.F.R. § 674.2(b). Q4: What are the eligibility requirements

for the institution? A4: The college, university, vocational

school, or other postsecondary educational institution where the student is enrolled must be an institution that is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088) and, therefore, eligible to participate in the student aid programs administered by the Department of Education. This category includes virtually all accredited public, nonprofit, and proprietary postsec

Education Tax Incentives

Notice 97–60

PURPOSE

The questions and answers contained in this notice provide guidance on the higher education tax incentives recently enacted by the Taxpayer Relief Act of 1997 (Pub. L. No. 105–34, 111 Stat. 788) (TRA ‘97). Specifically, TRA ‘97 added § 25A of the Internal Revenue Code providing the Hope Scholarship Credit and Lifetime Learning Credit, § 221 providing a deduction for student loan interest, and § 530 creating Education Individual Retirement Accounts (“Education IRAs”). TRA ‘97 also amended § 72(t) eliminating the early withdrawal tax on certain IRA withdrawals, § 127 providing an exclusion from income for employer-provided educational assistance, and § 529 setting the requirements for tax-exempt status for qualified state tuition programs (QSTPs).

These provisions create several new tax benefits for families who are saving for, or already paying, higher education costs or are repaying student loans. In addition, TRA ‘97 extends the exclusion for employer-provided educational assistance and makes the rules for qualified state tuition programs more flexible. The following discussion reviews in greater detail the requirements for each of these benefits. Whether a taxpayer may take advantage of these benefits depends on the taxpayer’s individual facts and circumstances.

DISCUSSION