“Qualifying” education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. That sounds like it covers a lot, but there are limitations.
For example, these expenses do not qualify:
- Room and board
- Medical expenses (including student health fees)
- Similar personal, family or living expenses
Generally, expenses for sports, games, hobbies or other non-credit courses don't qualify, unless the course or activity is part of the student’s degree program.
You can claim an education credit for qualifying education expenses you paid by cash, check, credit or debit card, or with money from a loan. If a loan was used, you take the credit for the year you paid the expenses – not the year you get the loan, or the year you repay it.
A couple of fine points should be explained here, because they are particular to the specific credit you want to use on your income tax return:
- For the American Opportunity Credit, expenses for books, supplies and equipment count as qualified education expenses – even if purchased off-campus.
- As mentioned above, expenses for sports, games, hobbies or other non-credit courses are not generally allowed as qualifying expenses, but for the Lifetime Learning Credit, these expenses can qualify if the course helps the student acquire or improve job skills. Also, while most education credits say the student’s expenses must be for higher education that results in a degree or some other recognized education credential, the Lifetime Learning Credit accepts expenses that merely improve the student’s job skills.
Common Pitfalls to Avoid
Here are the top errors the IRS sees when taxpayers claim education credits:
- A student claiming the credit is listed as a dependent or spouse on another tax return.
- A student claiming the credit doesn’t have a Form 1098-T showing they attended an eligible education institution.
- A student claiming the credit did not pay qualifying education expenses.
- The tax return claiming an education credit is for a student who wasn’t attending a college or other higher education institution.