HouseStark wrote:It's not unreasonable to use the 1098-T figures, but they are often wrong, so it's good to have an understanding of what you are paying. It shouldn't be that difficult to obtain and review an actual account statement from the institution. The statement should show what was billed and what was paid when, and whether it was qualified expenses such as tuition and fees, or whether it was other.
IRS Pub 970 wrote:Related expenses. Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance.
However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution.
IRS Pub 970 wrote:Qualified education expenses do not include amounts paid for:
Medical expenses (including student health fees),
Room and board,
Similar personal, living, or family expenses.
This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.
Kevin M wrote:OK, so even though the 1098-T may show the amount billed for 2012 as $10,000, you didn't pay all of it (my 1098-T does not show amount paid, only amount billed). If it were me, I'd do whichever was to my advantage depending on my tax situations in 2012 vs. 2013. Otherwise, it doesn't matter, since the credit you don't get this year you'll get next year; I think I'd keep it simple and just count the entire $5,000 paid in 2012 as a qualified expense, then include the other $5,000 as qualified expense for 2013.
VGSailor wrote:Thanks everyone for your replies.
I'm not sure if my question was clear or if I made clear what my question was.
I think it boils down to this. Let's say,
Tuition Spring 2013: $10,000
Room Spring 2013: $5,000
In December 2012, I pay $5,000 to cover some of the costs of 2013; In January, I pay the remaining $10,000. I can only claim the $5,000 that was paid in $2012.
But, how does that $5,000 get allocated in this case? Does all of it go to tuition, in which case $5,000 is qualified education expenses? Or does it all go to room and I can claim none of it? Or do I do the prorated and say 2/3 * $5,000 = $3,333?
This is what doesn't make sense to me. It's not like that $5,000 went towards something specific. It was just a payment that gets credited to the overall bill. Right now, I favor the prorated method.
EDIT: I also realize that TurboTax asks me for what I paid. That is what I'm trying to figure out and hence my question above. I'm sure I'm not the only one, so I feel like I'm missing something.
(4)Treatment of a comprehensive or bundled fee.— If a student is required to pay a fee (such as a comprehensive fee or a bundled fee) to an eligible educational institution that combines charges for qualified tuition and related expenses with charges for personal expenses described in paragraph (d)(3) of this section, the portion of the fee that is allocable to personal expenses is not included in qualified tuition and related expenses. The determination of what portion of the fee relates to qualified tuition and related expenses and what portion relates to personal expenses must be made by the institution using a reasonable method of allocation.
(3)Personal expenses.—Qualified tuition and related expenses do not include the costs of room and board, insurance, medical expenses (including student health fees), transportation, and similar personal, living, or family expenses, regardless of whether the fee must be paid to the eligible educational institution for the enrollment or attendance of the student at the institution.
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