What is considered a qualified education expense and what can I claim?

Generally, qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student at any accredited college, vocational school, or other post-secondary educational institution eligible to participate in the student aid programs administered by the Department of Education.

What can I claim as a qualified education expense?

Qualified Education Expenses are tuition and certain related expenses required for enrollment or attendance at an eligible institution. Let's look at what can be claim based on each specific credit/deduction: 

American Opportunity Credit

If you qualify for the American Opportunity Credit you may claim the following expenses:

• Tuition and Student Activity Fees are included only if the fees are paid to the institution in order to enroll or attend school. Typically this amount is included in Box 1 or Box 2 of the 1098-T Form.
• Expenses for books, supplies, and equipment needed for a course of study whether they are purchased from the institution or not.

 Lifetime Learning Credit

If you qualify for the Lifetime Learning Credit you may claim the following expenses:

• Tuition and Student Activity Fees which are typically Box 1 or Box 2 of the Form 1098-T
• Expenses for course related books, supplies and equipment ONLY if the fees and expenses must be paid as a condition of enrollment or attendance.

Tuition and Fees Deduction (No longer available after tax year 2020)

• For purposes of the tuition and fees deduction, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution.

What expenses do NOT qualify as an Education Expense? 

The expenses below are NOT qualified expenses even if they must be paid to the institution as a condition of enrollment or attendance.

• Room and Board
• Insurance
• Medical Expenses
• Transportation
• Personal Living or Family Expenses
• Education that involves sports, games or hobbies
• Any non-credit course unless it is part of the students degree program 

How do I calculate the amount of qualified expenses?

 You should have received a Form 1098-T from your school. You will need this form in order to calculate the qualified expenses that you can claim.  According to the IRS you must reduce any amount of qualified expenses by the amount you received as scholarships and grants. Scholarships and Grants cannot be included in the amount of qualified expenses. The program will automatically choose which credit or deduction benefits you the most, based off how the questions are answered in the program.

•  If you have an amount in Box 1 or Box 2 of the Form 1098-T and there is no amount in Box 5 then your qualified expenses would be that amount plus any other qualifying expenses such as books and supplies.
• If you have an amount in Box 1 or Box 2 and you have an amount in Box 5, you must subtract Box 5 from the amount in Box 1 or 2. This total would become the qualified expenses plus any eligible books and supplies. For example, Box 5 is $1000 and Box 1 is $3000, then the qualified expense amount would be $2000 plus any books or supplies.  To enter qualified expenses in the  program, choose: 
  1. Federal Section
  2. Deductions
  3. Select My Forms
  4. Credits
  5. Education Credits Form 1098-T
• If the amount in Box 5 is greater than the amount in Box 1 or Box 2 then you are not eligible to take an education credit. For examples if Box 5 is $5000 and Box 2 is $2000, you are not eligible for a credit. If the amount in Box 5 for scholarships and grants was used for educational purposes you do not have to report the amount. If the amount was not used for education then you must include that amount as income on your return. To include this amount as income in the program choose: 
  1. Federal Section
  2. Income
  3. Select My Forms
  4. Less Common Income
  5. Other Compensation
  6. Scholarships and Grants

Additional Information

• When would I use Form 8863, Education Credit?
• Publication 970