Reporting source: IRS Oakland SPEC
Education Benefits – Slide Deck – courtesy of AARP Foundation
For Education Credits
- ALWAYS includes tuition and fees that must be paid to the school as a condition of enrollment, course-related books, supplies and equipment
- ALWAYS excludes insurance, medical expenses (like student health fees), parking fees
- USUALLY excludes room and board, and transportation
NOTE: A computer is NOT a qualified expense, unless it is REQUIRED by the institution. The actual law says it must be required. If you look at tax court cases, the judge is not unsympathetic to the person, but they always rule by what the actual law says (about the equipment being required).
Scholarships for purposes of claiming EITC are considered unearned income.
Scholarships for purposes for calculating taxable income are earned income.
Scholarship money doesn’t count for support test for dependency.
Coverdell Education Savings Account (ESA)
Computer equipment is a qualified expense if it is “used by the beneficiary in post-secondary school (or used by the beneficiary and family in elementary or secondary school)”, from the Pub. 970.
Is there a difference between a grant and scholarship?
Definition-wise in general, yes. But for tax purposes, they are treated the same.
Is a stipend taxable?
Stipends are always taxable. Sometimes it’s exempt from social security and medicare taxes.
Taxpayer withdrew from IRA (and is under 59.5 years old). He used it for room and board while going to a qualified educational institution. Is he subject to the withdrawal penalty of 10%?
No. Use Form 5329 and look up the exception code.
Attachments (provided during training)
- Education Benefits – Slide Deck – courtesy of AARP Foundation
- IRS Pub. 970 – Tax Benefits for Education
- Pub. 4012, Section J – Education Credits
- Pub. 4491 – Education Credits chapter
- Form 13614c – Intake Sheet
- Form 1040 – U.S. Individual Income Tax Return
- Form 1040 – Schedule A
- Form 1098-T – Tuition Statement
- Instructions for Forms 1098-E and 1098-T
- Form 8615 – Tax for Certain Children Who Have Unearned Income
- Instructions for Form 8615
- Form 8863 – Education Benefits (American Opportunity and Lifetime Learning Credits)
- Instructions for Form 8863
- Form 8917 – Tuition and Fees Deduction