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The Internal Revenue Service offers a range of tax benefits for the costs of education. However, these tax benefits apply only to post-secondary education, such as colleges, universities and vocational schools. Knowing what costs qualify for the various tax benefits and who qualifies to claim the expenses can help you minimize your taxes and get a bigger tax return.
Tuition almost always qualifies to be included as part of the American opportunity credit, lifetime learning credit or tuition and fees deduction. However, tuition paid for sports, games or hobbies doesn't qualify for a tax break unless that course is taken as part of the student's degree program or if it improves job skills.
Most Required Fees
Required fees generally count as qualified educational expenses for any of the tax breaks for education. For example, if the school charges a mandatory student activity fee or technology fee, those costs count. Other optional fees, such as student tickets to the school's fine arts performances or athletic competitions, are not qualified expenses because they are not mandatory. However, student health fees, even if required, do not count.
Books and Supplies
Books and supplies generally count only for the American opportunity credit. For the American opportunity credit, you can include the books and supplies no matter where you purchase them. However, for the tuition and fees deduction and the lifetime learning credit, you can include the cost of books or supplies that you are required to purchase or rent through the school. For example, if the school requires that you purchase lab supplies through the school, you can include those costs. However, if a course requires a certain textbook that you can purchase through the school's bookstore or elsewhere, you cannot include that expense.
Students Besides Yourself
You can claim the American opportunity credit, lifetime learning credit or tuition and fees deduction for expenses that you pay not only for yourself, but also for your spouse or your dependents. For example, if you still claim your daughter as a dependent, you can use the expenses that you pay on her behalf to claim a tax benefit. However, if you don't claim your daughter as a dependent, you can't claim the tax benefit even if you pay the expenses.
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