What are qualified educational expenses?

What are Qualified Educational Expenses in Rancho Cucamonga - Man with laptop

With the rising costs of an extended education, post-secondary students and their parents could use whatever help they can get in maximizing expenditures. The Internal Revenue Service has two different credits that may be of assistance. The trick is learning which tax credit will provide you with the most benefit. Whyte and Associates is a tax and accounting service that has been serving the Inland Empire since 1956. We are here to help you make sense of qualified educational expenses.

Tuition and other expenses incurred as a direct result of college attendance are considered qualified educational expenses. As mentioned, there are two credits, only one of which may be used in a tax year. In each credit are specific qualified educational expenses:

Under the American Opportunity Credit, one may claim:

  • Tuition and other fees. The fees incurred must be required to enroll in and attend classes.
  • Books, equipment, and other supplies that are purchased for a course of study. These need not be purchased directly from the qualified educational institution.

Under the Lifetime Learning Credit, a student may claim a credit of 20 percent of up to $10,000 paid to a post-secondary educational institution in that year. The courses taken do not necessarily have to be in line with a course of study. The expenses accounted for, however, must be required to take the class. For instance, a recommended book that is not required would not qualify as an educational expense. The Lifetime Learning Credit may not be available depending on total income. Additionally, unlike the American Opportunity Credit, the Lifetime Learning Credit requires that books and equipment be purchased directly from the educational institution.

What about miscellaneous needs?

When attending college, a student may require equipment such as a computer. Such an expense would qualify under the American Opportunity Credit due to the leniency to purchase necessary course material and equipment from a source outside of the educational institution. Even a laptop computer can qualify under this credit if other requirements are met.

What does not qualify under either of these credits is room and board, regardless of the distance between college and home. Living expenses, including transportation, remain the responsibility of the student and his or her family.

Your tax and accounting service in Rancho Cucamonga has more than half a century of experience in the planning and preparation of taxes. We can help you make sense of the various educational expenses and credits so that you are maximizing your full potential. Call (909) 575-0080 today.