By Travis DeNeal 14

Freshmen and sophomores can get a $1,500 tax credit next year from the Hope Scholarship, but students need to give careful attention to tuition payments to take advantage of the tax break, SIUC administrators say.

The Hope Scholarship tax credit of up to $1,500 is available to students or parents of students who earn up to $40,000 (singly filed return) or $80,000 (jointly filed return) annually. To ensure that tuition payments can be used as tax credits, though, students must wait until Jan. 1 before making tuition payments. The scholarship goes into effect in January.

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Kevin Bame, SIUC’s director of tax management and compliance, says students will have a limited amount of time to pay their tuition, because the first payment to the Bursar’s Office is due Jan. 5.

This is a narrow window for payment, Bame said, but we recommend that if students are eligible for the credit, then they should wait until after Jan. 1 so it will be applicable for 1998. If they pay during December, they cannot get a tax credit for the amount paid.

Students or parents eligible for the tax credit can receive 100 percent of the first $1,000 paid and 50 percent of the second $1,000 paid. However, Bame said, the party receiving the tax credit cannot get more tax credit than the amount of tax liability they have.

For instance, if a student only has $1,000 in tax liability, that student can only receive a tax credit of up to $1,000.

Though many students will be saving money through the program, SIUC and other colleges will be forced to spend more money in the future to document financial information of students and their parents.

The Internal Revenue Service will require colleges to provide tax information of students and their parents to prove eligibility for the Hope Scholarship.

However, colleges will not have to extensively document financial information this year, Walker Allen, director of Admissions and Records, said.

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Apparently, the IRS has relaxed the requirement that we collect taxpayer information numbers of parents or spouses this year, Allen said, but that information, to some extent, likely will be required next year.

There is no estimate yet of how much the University will spend for the documentation process.

SIUC has additional information about the Hope Scholarship program on the University web site at www.siu.edu/~tax. Bame and Allen warn that information given by the University is not to be taken as tax advice.

A person really needs to talk to his or her tax adviser and find out exactly what they need to do, Allen said. Everyone’s situation is different. If we tried to give tax advice, it could get kind of sticky.

Although claiming the tax break may require consulting a tax adviser and the plan may increase University spending to maintain paperwork, Bame said the net benefits of the plan outweigh its problems.

The bottom line is, it’s a darned good deal for students, Bame said.