Thanks for your replies to my postings. I am a first timer w/ a dependent child in college. As my son is in Maryland college, I received 1098-T that shows only tuition expenses. There are other expenses like room, board, meals, books, computer etc.
I find only 2K as tax credit using 1098-T info. How/where can I input other expenses mentioned above in 2016 tax return?
Are these expenses tax deductible?
Thanks for sharing.
Only QEE (qualified education expenses) are eligible for tax credits. There are two credits, and you can only take one, the AOTC or the Lifetime Learning credit. Check IRS publication 970 for information about the credits.
Nothing is deductible. Room, board, travel, etc are not QEE. Tuition, books, some fees are QEE. Your 1098-t probably shows tuition and qualified fees, but not books.
I did find another thread posted on 2009.
What college costs are tax deductible?
http://talk.collegeconfidential.com/financial-aid-scholarships/643301-what-college-costs-are-tax-deductible.html
Is it applicable in 2016?
Did anyone follow idea in this thread?
Thanks for sharing
Read publication 970. Do not rely on a 6 year old thread
Thanks for your replies.
I find that IRS allow to gift 14K for 2016. Is it possible to buy dorm, meal, books, computer etc as gift to my kid?
Ref: https://www.irs.gov/pub/irs-pdf/i709.pdf
Thanks for sharing.
You can gift whatever you want to your son. Doesn’t make it tax deductible (gifts are not deductible unless they are to a charity). You aren’t going to gain anything by making it a gift, and if you gift him more than $14k per year, you need to report it to the IRS. No benefit.
Here is what I find from IRS Publication:
Deductions
Tuition and Fees Deduction
You may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.
The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction, reported on Form 8917, Tuition and Fees Deduction, is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if, for example, you don’t qualify for the American opportunity or lifetime learning credits.
You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax. You cannot claim the tuition and fees deduction as well as an education credit for the same expense.
This will lead to cover 20% of Tuition expenses, less than 10% of Tuition + Other expenses as TAX deductions.
We all know the Annual College expenses major piece of annual budget.
What are the other avenues to cover the rest after TAX deductions?
Thanks for sharing.
You can only claim one education tax credit per year per child.
AOTC can be taken for four years, it allows books to be qualified expenses as well. The first $2,000 of QEE result in $2,000 of AOTC (if you have tax liability, up to 40% max $1,000 can be refunded).
There are income limits for the AOTC as well.
If you have a 529 account, room and board are qualified expenses for tax free 529 distributions.
But no, you cannot get $2,000 AOTC and then try to claim tuition and fees deduction on the same tuition expenses for the same year/child.
The max AOTC is $2,500. So you are pretty close with $2,000. If you haven’t included books, you can claim them in addition to tuition/fees listed on 1098T.
So, my dependent son attends a private university that generously provides grants covering 100% of expenses beyond EFC. The grant amount applies to both tax-credit-qualified and unqualified expenses. In our case, the grant totals more than the qualifying tuition and fees. So, I don’t receive a 1098T.
However, I still pay an amount to the university each semester (my EFC) that is applied to my total bill. Can I argue that the portion of my bill that I pay (and that the grant doesn’t cover) is tuition and fees (and that the grant is covering all non-qualifying expenses and only a portion of the qualifying expenses)? Or will the IRS say that the grant applies to qualifying expenses first?
I’ve read the 970 instructions in detail and they do not appear to provide an example that matches my situation. The only clue I get is that the calculation process listed (qualifying fees less grant amount) does not seem to be in my favor.
Ex. Tuition, qualified fees, books total $40k. Your son has a scholarship for $40k. You also pay the university $15k for room and board. If you do nothing, the QEE is offset by the scholarship, so no taxable income to son, no AOTC for you.
Ex: Same numbers, but the scholarship allows you to use it for r&b, so you do. You pay the school $4000 to cover tuition (and another $11k to cover the rest of the r&b), but your son pays tax on $4000 of the scholarship on his return (it is taxed at YOUR rate because of the kiddie tax rules). You now qualify for the $4000 to be used for the AOTC.
So you can do what you want, apply the scholarship to the non-qualified expenses IF the scholarship allows it (can’t be done with some scholarships that may be used for tuition only) AND if your son claims it as unearned income on his return.
Yes, you can only claim the tax credit if you allocate some of the grant to cover unqualified expenses (room and board), therefore making it taxable income to your son. Then the out of pocket expenses can be allocated to pay for $4,000 of qualified tuition and fees, which you can claim for AOTC.
https://www.irs.gov/publications/p970/ch02.html
^see “Coordination with Pell grants and other scholarships”
Thanks for suggestions. After reviewing the suggested pointers, I am able to claim 1500 tax credit for 2016.
I am still researching, whether any better way handle education expenses (Major piece for year) on tax return.
There may be someone in this forum has creative ideas /tax accounting to share some pointer.
Thanks for sharing.
All I know is the minute the wife and I started to make over 200k/yr we didnt qualify for crud anymore…all I do is pay tax and not qualify for anything.
I think education credits start phasing out at $160,000 MAGI for married filing jointly.
The AOTC starts phasing out at $80k (single)/$160k (married). The other credits (lifetime learning, tuition) are gone LONG before those amount.
@MDRI I don’t understand why you only were able to claim $1,500 education credit.
Your son attends UMBC right, isn’t the tution at least $10,000 for the year?
You posted in another thread that he didn’t receive any scholarships.
I think that may be due to the income level.