What Educational Expenses Are Tax Deductible?

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If you are attending college, you know that it can be expensive. Fortunately, there is a way that you can use those expenses as deductions or as tax credits when it’s time to file with the IRS. If you do take deductions, it’s important to understand the types of expenses that are allowed so that you make an accurate account of qualifying expenditures.

Qualifying Education Expenses

Educational expenses that qualify for a deduction in taxes include expenses such as tuition and fees. Here’s a list of qualified education expenses that you can use to help reduce your tax bill:

– Tuition paid for your courses
– Fees that are charged by a college that are related to activities deemed necessary for course completion
– Money paid for course materials
– Electronic devices used for school coursework such as a computer

Non-Qualifying Expenses

In addition to your tuition, fees and the expenditures for course materials, you will have to pay for other expenses when you attend college. Unfortunately, many of these expenses do not qualify for education credits. The following list of expenses cannot be used as deductions or credits:

– Expenditure for room and board
– Insurance — such as renters insurance for an apartment you rent off-campus
– Medical expenditures
– Transportation to and from college or around campus
– Personal expenses

Other Non-Qualifying Expenses

In addition to the non-qualifying expenses already listed, you cannot use expenditures on hobbies, games, sports or noncredit coursework as a tax credit or deduction unless it plays some role in attaining your chosen degree. If that’s the case, it can only be used as a Lifetime Learning Credit when you file your taxes. This type of activity qualifies since it helps you improve or acquire skills related to your profession.

Allowed Funds Used

Typically, you will pay for your education expenses by using a check, cash debit card or credit card. These are all accepted forms of funds that are eligible for tax credits and deductions. In addition, if you pay for your college courses by using money obtained from a loan, you must use the credit for the year that you actually incurred the expense, not when you actually received funds from the loan or pay off the loan.

Time Period

To qualify for education expense deductions, your expenditures can be made during academic periods that include quarters, trimesters, semesters or when coursework is provided during the summer. Some schools do not have designated academic periods and only use credit hours. If this is the case in your situation, treat the expenditure that you made for a certain amount of credit hours as a single academic period. If you decide to withdraw from any coursework, you are eligible to claim tax credits for non-returned tuition or fees.

Who Pays?

To be eligible for a qualified education expense, the expense must be made by the following:

– You or a spouse (joint return)
– A dependent on your return who is a student
– A relative or friend (third-party)