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IRS.gov Website
Publication 970
taxmap/pubs/p970-022.htm#en_us_publink100025397

What Expenses Qualify?(p38)

rule
The tuition and fees deduction is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the deduction is allowed for qualified education expenses paid in 2014 in connection with enrollment at an institution of higher education during 2014 or for an academic period beginning in 2014 or in the first 3 months of 2015.
For example, if you paid $1,500 in December 2014 for qualified tuition for the spring 2015 semester beginning in January 2015, you may be able to use that $1,500 in figuring your 2014 deduction.
taxmap/pubs/p970-022.htm#en_us_publink100025398

Academic period.(p38)

rule
An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period.
taxmap/pubs/p970-022.htm#en_us_publink100025399

Paid with borrowed funds.(p38)

rule
You can claim a tuition and fees deduction for qualified education expenses paid with the proceeds of a loan. Use the expenses to figure the deduction for the year in which the expenses are paid, not the year in which the loan is repaid. Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account.
taxmap/pubs/p970-022.htm#en_us_publink100025400

Student withdraws from class(es).(p38)

rule
You can claim a tuition and fees deduction for qualified education expenses not refunded when a student withdraws.
taxmap/pubs/p970-022.htm#en_us_publink100025401

Qualified Education Expenses(p38)

rule
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.
taxmap/pubs/p970-022.htm#en_us_publink100025402

Eligible educational institution.(p38)

rule
An eligible educational institution 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.
An eligible educational institution also includes certain educational institutions located outside the United States that are eligible to participate in a student aid program administered by the Department of Education.
Deposit
The educational institution should be able to tell you if it is an eligible educational institution.
taxmap/pubs/p970-022.htm#en_us_publink100025404

Related expenses.(p38)

rule
Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.
taxmap/pubs/p970-022.htm#en_us_publink100025405

Prepaid expenses.(p38)

rule
Qualified education expenses paid in 2014 for an academic period that begins in the first three months of 2015 can be used in figuring an education credit for 2014 only. See Academic period, earlier. For example, you pay $2,000 in December 2014 for qualified tuition for the 2015 winter quarter that begins in January 2015, you can use that $2,000 in figuring an education credit for 2014 only (if you meet all the other requirements).
EIC
You cannot use any amount you paid in 2013 or 2015 to figure the qualified education expenses you use to figure your 2014 education credit(s).
In the following examples, assume that each student is an eligible student and each college or university an eligible educational institution.
taxmap/pubs/p970-022.htm#en_us_publink100025408

Example 1.(p39)

Jackson is a sophomore in University V's degree program in dentistry. This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified education expense.
taxmap/pubs/p970-022.htm#en_us_publink100025409

Example 2.(p39)

Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Donna bought hers at College W's bookstore. Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified education expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution.
taxmap/pubs/p970-022.htm#en_us_publink100025410

Example 3.(p39)

When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. No portion of the fee covers personal expenses. Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Therefore, it is a qualified expense.
taxmap/pubs/p970-022.htm#en_us_publink100025411

No Double Benefit Allowed(p39)

rule
You cannot do any of the following.
taxmap/pubs/p970-022.htm#en_us_publink100025414

Adjustments to Qualified Education Expenses(p39)

rule
For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. The result is the amount of adjusted qualified education expenses for each student. You must also reduce qualified education expenses by the other amounts referred to in No Double Benefit Allowed, earlier.
taxmap/pubs/p970-022.htm#en_us_publink100025416

Tax-free educational assistance.(p39)

rule
For tax-free educational assistance received in 2014, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. See Academic period, earlier.
Some tax-free educational assistance received after 2014 may be treated as a refund of qualified education expenses paid in 2014. This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2014 for qualified education expenses paid on behalf of a student in 2014 (or attributable to enrollment at an eligible educational institution during 2014).
If this tax-free educational assistance is received after 2014 but before you file your 2014 income tax return, see Refunds received after 2014 but before your income tax return is filed, later. If this tax-free educational assistance is received after 2014 and after you file your 2014 income tax return, see Refunds received after 2014 and after your income tax return is filed, later.
This tax-free education assistance includes:
Generally, any scholarship or fellowship grant is treated as tax free. However, a scholarship or fellowship grant is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship grant is received) and either of the following is true.
Deposit
You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. For details, see Adjustments to Qualified Education Expenses in chapters 2 and 3.
taxmap/pubs/p970-022.htm#en_us_publink100025427

Refunds.(p40)

rule
A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Some tax-free educational assistance received after 2014 may be treated as a refund. See Tax-free educational assistance, earlier.
taxmap/pubs/p970-022.htm#en_us_publink100025429
Refunds received in 2014.(p40)
For each student, figure the adjusted qualified education expenses for 2014 by adding all the qualified education expenses for 2014 and subtracting any refunds of those expenses received from the eligible educational institution during 2014.
taxmap/pubs/p970-022.htm#en_us_publink100025430
Refunds received after 2014 but before your income tax return is filed.(p40)
If anyone receives a refund after 2014 of qualified education expenses paid on behalf of a student in 2014 and the refund is paid before you file an income tax return for 2014, the amount of qualified education expenses for 2014 is reduced by the amount of the refund.
taxmap/pubs/p970-022.htm#en_us_publink100025431
Refunds received after 2014 and after your income tax return is filed.(p40)
If anyone receives a refund after 2014 of qualified education expenses paid on behalf of a student in 2014 and the refund is paid after you file an income tax return for 2014, you may need to repay some or all of the credit. See Credit recapture, later.
taxmap/pubs/p970-022.htm#en_us_publink100025433

Coordination with Coverdell education savings accounts and qualified tuition programs.(p40)

rule
Reduce your qualified education expenses by any qualified education expenses used to figure the exclusion from gross income of (a) interest received under an education savings bond program, or (b) any distribution from a Coverdell education savings account or qualified tuition program (QTP). For a QTP, this applies only to the amount of tax-free earnings that were distributed, not to the recovery of contributions to the program.
taxmap/pubs/p970-022.htm#en_us_publink100025434

Credit recapture.(p40)

rule
If any tax-free educational assistance for the qualified education expenses paid in 2014 or any refund of your qualified education expenses paid in 2014 is received after you file your 2014 income tax return, you must recapture (repay) any excess credit. You do this by refiguring the amount of your adjusted qualified education expenses for 2014 by reducing that amount by the amount of the refund or tax-free educational assistance. You then refigure your education credit(s) for 2014 and figure the amount by which your 2014 tax liability would have increased if you had claimed the refigured credit(s). Include that amount as an additional tax for the year the refund or tax-free assistance was received.
taxmap/pubs/p970-022.htm#en_us_publink100025435
Example.(p40)
You paid $3,500 of qualified education expenses in December 2014, and your child began college in January 2015. You claimed $3,500 as the tuition and fees deduction on your 2014 income tax return. The reduction reduced your taxable income by $3,500. Also, you claimed no tax credits in 2014. Your child withdrew from two classes and you received a refund of $2,000 in 2015 after you filed your 2014 tax return. Refigure your 2014 tuition and fees deduction using $1,500 of qualified education expense instead of the $3,500. The refigured tuition and fees deduction is $1,500. Do not file an amended 2014 tax return to account for this adjustment. Instead, include the difference of $2,000 (but only to the extent this difference would have increased your 2014 tax) on the "Other income" line of your 2015 Form 1040. You cannot file Form 1040A for 2015.
taxmap/pubs/p970-022.htm#en_us_publink100025436

Amounts that do not reduce qualified education expenses.(p40)

rule
Do not reduce qualified education expenses by amounts paid with funds the student receives as:
Do not reduce the qualified education expenses by any scholarship or fellowship grant reported as income on the student's tax return in the following situations.
taxmap/pubs/p970-022.htm#en_us_publink100025438

Example 1.(p40)

In 2014, Jackie paid $3,000 for tuition and $5,000 for room and board at University X. The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. The terms of the scholarship state that it can be used to pay any of Jackie's college expenses.
University X applies the $2,000 scholarship against Jackie's $8,000 total bill, and Jackie pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. Jackie does not report any portion of the scholarship as income on her tax return.
In figuring the tuition and fees deduction, Jackie must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. Jackie is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship) in 2014.
taxmap/pubs/p970-022.htm#en_us_publink100025439

Example 2.(p41)

The facts are the same as in Example 1, except that Jackie reports her entire scholarship as income on her tax return. Because Jackie reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. Jackie is treated as having paid $3,000 in qualified education expenses.
taxmap/pubs/p970-022.htm#en_us_publink100025440

Expenses That Do Not Qualify(p41)

rule
Qualified education expenses do not include amounts paid for: This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.
taxmap/pubs/p970-022.htm#en_us_publink100025441

Sports, games, hobbies, and noncredit courses.(p41)

rule
Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify.
taxmap/pubs/p970-022.htm#en_us_publink100025442

Comprehensive or bundled fees.(p41)

rule
Some eligible educational institutions combine all of their fees for an academic period into one amount. If you do not receive, or do not have access to, an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. See Figuring the Deduction, later, for more information about Form 1098-T.