Some people are surprised when little Johnny or Jane’s college or school they picked out ends up NOT being eligible for a tax credit.
Qualified institutions include any college, university, vocational school, or other post secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education. This includes most accredited public, non-profit, and privately owned for-profit post-secondary institutions.
There is a list you can check and you can also consult with the school.
Expenses that qualify at these qualified schools include:
- Tuition and fees required for enrollment
- The expenses for the tax year or the academic period that starts during the tax year or the first 3 months of the next tax year
- Student activity fees that are required to be paid in order to attend the school (example: a fee all students have to pay that funds ALL on-campus organizations and activities)
- books, supplies, and equipment REQUIRED for the course and that are REQUIRED to be purchased DIRECTLY from the school
- FOR THE AMERICAN OPPORTUNITY CREDIT ONLY: the items do not have to be purchased directly from the school
Expenses that do NOT qualify for the credits:
- room and board
- medical expenses including student health fees
- personal, living, or family expenses
The expenses must be paid for higher education that results in a degree or other recognized education credit. But for the LIFETIME LEARNING CREDIT the course can be taken just to acquire or improve a student’s job skills. It still must be at a recognized eligible institution.
What if the student drops a course? Any amount not refunded is still deductible.
The amount considered paid can be paid from your own funds or from loans.
You will need to have the 1098-T form from the college when you file your taxes.
Here’s a handy (if not a little outdated) list to compare the possible education credits/deductions courtesy of the IRS.