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previous page Previous Page: Publication 970 - Tax Benefits for Education - Distributions
next page Next Page: Publication 970 - Tax Benefits for Education - How Much Can You Contribute
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taxmap/pubs/p970-037.htm#en_us_publink100021044

Chapter 8
Qualified Tuition Program (QTP)(p54)

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What's New(p54)


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taxmap/pubs/p970-037.htm#en_us_publink100021046

Withdrawal of economic stimulus payment from a qualified tuition program.(p54)

If your economic stimulus payment was directly deposited to your QTP and you withdraw the payment by the later of June 1, 2009, or due date of your return (including extensions), the amount withdrawn will not be taxed and no additional tax or penalty will apply.

taxmap/pubs/p970-037.htm#TXMP501fe220Introduction

Qualified tuition programs (QTPs) are also called "529 plans."
States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. You cannot deduct either payments or contributions to a QTP. For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it.
taxmap/pubs/p970-037.htm#en_us_publink100021047

What is the tax benefit of a QTP.(p54)


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No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. See Are Distributions Taxable, on the next page, for more information.
Deposit
Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim either the Hope credit or the lifetime learning credit. See Coordination With Hope and Lifetime Learning Credits, later.
taxmap/pubs/p970-037.htm#en_us_publink100021049

What Is a Qualified  
Tuition Program(p54)


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A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. The program must meet certain requirements. Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP.
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Qualified education expenses.(p54)


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These expenses are the amounts paid for tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution (defined below).
They also include the reasonable costs of room and board for a designated beneficiary who is at least a half-time student. The cost of room and board qualifies only to the extent that it is not more than the greater of the following two amounts.
  1. The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
  2. The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.
You will need to contact the eligible educational institution for qualified room and board costs.
The definition of qualified education expenses was expanded in 2002 to include expenses of a special needs beneficiary that are necessary for that person's enrollment or attendance at an eligible educational institution.
EIC
As of this printing, regulations defining a "special needs beneficiary" have not been released. If available, the definition will be included in Publication 553, Highlights of 2008 Tax Changes, available in early 2009.
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Designated beneficiary.(p54)
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The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. The designated beneficiary can be changed after participation in the QTP begins. If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship.
taxmap/pubs/p970-037.htm#en_us_publink100021053

Eligible educational institution.(p54)


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For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.
Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid (FSA) programs.
previous pagePrevious Page: Publication 970 - Tax Benefits for Education - Distributions
next pageNext Page: Publication 970 - Tax Benefits for Education - How Much Can You Contribute
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication