This page answers questions on Education Credits.

This page answers questions on Education Credits.

OLT TAX CORNER ~ Education Credits/ Tuition & Fees Deduction/ Student Loan Interest
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 OLT TAX CORNER ~ Education Credits/ Tuition & Fees Deduction/ Student Loan Interest
Education Credits FAQ
1.Can I claim education credit for my child’s private elementary school?
2.Can I claim more than 1 type of education credits for the same student?
3. What expenses qualify for the education credits?
4.Are expenses to attend private high schools eligible for the education credits?
5.If I pay college tuition and fees with a scholarship, can I claim an education credit on Form 8863 for those payments?
6.Where do I put information from a 1098-T?
7.My filing status is head of household. According to the separation agreement, my ex-husband claims our college daughter as his dependent for tax purposes. I, however, pay all of her education expenses. Can I take the tuition and fees deduction?
8.I received a Pell Grant. Do I have to claim that as income?
9. What is the limit for deducting student loan interest?
10.What is a Coverdell ESA?


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Can I claim education credit for my child’s private elementary school? Top
No. You cannot. Expenses that qualify are tuition and fees required for enrollment or attendance at an accredited college, university, vocational school, or other post-secondary educational institution that is eligible to participate in a student aid program administered by the Department of Education. Pre-School and private tuition for elementary and secondary school does not qualify.
Qualified expenses do not include room and board, insurance, transportation, or other similar personal, living, or family expenses. Qualified expenses may include fees for books, supplies, and equipment only if the fee must be paid to the school for the student's enrollment or attendance. In addition, qualified expenses may include student activity fees if the fee must be paid to the school for the student's enrollment or attendance.
Can I claim more than 1 type of education credits for the same student?Top
No, you cannot. For each student, you can elect one of the credits. For example, if you elect to take the American Opportunity creditt for a child on your tax return, you cannot, for that same child, also claim the lifetime learning credit for the current tax year. If you are eligible to claim the American Opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both.
What expenses qualify for the education credits? Top
Expenses that qualify are tuition and fees required for enrollment or attendance at any college, vocational school, or other post-secondary educational institution eligible to participate in the student aid programs administered by the Department of Education. Qualified expenses do not include books, room and board, student activities, athletics (unless the course is part of the student's degree program), insurance, equipment, transportation, or other similar personal, living, or family expenses. The cost of books and equipment are generally not qualified expenses because eligible educational institutions usually do not require that fees for such books or equipment be paid to the institution as a condition of the student's enrollment or attendance at the institution.
Are expenses to attend private high schools eligible for the education credits?Top
No. Expenses paid to attend high school do not qualify for the education credits because a high school is not an eligible educational institution. An eligible educational institution is any college, university, vocational school, or other post-secondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit making) post-secondary institutions.
If I pay college tuition and fees with a scholarship, can I claim an education credit on Form 8863 for those payments?Top
No. You cannot claim a credit for the amount of higher education expenses paid for by tax-free scholarships.
If tuition was paid by a government subsidized loan, can I still take the Hope or Lifetime Learning Credit?
If you take out a loan to pay higher education expenses, those expenses may qualify for the credit if you will be required to pay back the loan. The credit is claimed in the year in which the expenses are paid, not in the year in which the loan is repaid.
Where do I put information from a 1098-T?Top
If you received a 1098-T, you can take that as a tuition and fees deduction or as an education credit.
The tuition and fees deduction reduces the amount of your income subject to tax, while the education credit reduces the tax. If you are qualified for the education credit, then taking the credit is typically more beneficial than taking the deduction.
My filing status is head of household. According to the separation agreement, my ex-husband claims our college daughter as his dependent for tax purposes. I, however, pay all of her education expenses. Can I take the tuition and fees deduction? Top
In order to qualify for the Tuition and Fee’s deduction, the student for which you are claiming the deduction must be a dependent for whom you claim on your tax return. If you are not claiming the student as a dependent on your return, you will not be able to take the deduction for the education expenses you paid for that student.
I received a Pell Grant. Do I have to claim that as income?Top
These need-based grants are treated as scholarships for purposes of figuring their taxability. They are tax free to the extent used for qualified education expenses during the period for which a grant is awarded. Only the taxable amount must be reported.
What is the limit for deducting student loan interest?Top
The maximum deductible interest on a qualified student loan is $2,500 per return, and it is reduced if your income is over certain limit. OLT.com software will calculate this amount for you.
What is a Coverdell ESA? Top
A Coverdell Education Savings Account (ESA) is a savings account created as an incentive to help parents and students save for education expenses.
The total contributions for the beneficiary (who is under age 18 or is a special needs beneficiary) of this account in any year cannot be more than $2,000, no matter how many accounts have been established. The beneficiary will not owe tax on the distributions if, for a year, the distributions from an account are not more than a beneficiary’s qualified education expenses at an eligible education institution. This benefit applies to higher education expenses as well as to elementary and secondary education expenses.
Distributions are tax-free as long as they are used for qualified education expenses, such as tuition, books, fees, etc., at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. The Hope and Lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. Refer to Publication 970 for more details. If the distribution exceeds education expenses, a portion will be taxable to the beneficiary and will be subject to an additional 10% tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship.
If there is a balance in the Coverdell ESA at the time the beneficiary reaches age 30, it must be distributed within 30 days. A portion representing earnings on the account will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member.


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