Can I use my own judgment in deciding what is a Qualified Tuition and Related Expense?

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Dyons
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Can I use my own judgment in deciding what is a Qualified Tuition and Related Expense?

Post by Dyons » Wed Feb 06, 2019 9:14 pm

I have a question about Qualified Tuition and Related Expenses (QTRE), specifically how much of it is what the school decides (based on their understanding of the IRS rules) and how much of it can be the taxpayer’s judgment.

My son’s school has provided what they consider QTRE in Box 1 of his 1098-T. (They helpfully provided a document identifying what the QTRE includes – Tuition, of course, but also Student Activity fee, College fee, Technology fee, Wellness fee, Drug Testing fee, and Lab expenses for various classes. In keeping with IRS rules, they point out that insurance fees, health fees, student athletic fees and any administrative fees are NOT QTRE.)

My question is about a specific fee charged by the school for a very specific matter: My child is a cadet at a Marine Academy and, as a part of his degree, which includes getting a third mate’s license, is required to spend mandatory time (45-90 days) at sea each year. This is done on a training ship owned by the school – a fully accredited school, by the way. We had to pay for something called a “Ship maintenance fee” as a part of his college fees. (I think this has to do with keeping the ship seaworthy and is part of its upkeep, the cost presumably shared by all students at the academy - as well as the federal govt.)

This fee does not seem to have been included in the QTRE and I wonder why not. (The school did not offer any explanation when I called to inquire.) After all, being on board the training ship is necessary (indeed mandatory) for graduation from this marine academy, and this is not a student-specific charge peripheral to the degree requirements. My question is: can I include this in calculating the actual (in my opinion) QTRE?

Can I use my judgment, in this specific case, to include this “maintenance fee” in QTRE despite the fact that the school did not? Could this discrepancy between the reported box 1 amount and my addition raise a red flag with the IRS?

Any response would be appreciated. Thanks very much in advance.

informal guide
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Re: Can I use my own judgment in deciding what is a Qualified Tuition and Related Expense?

Post by informal guide » Wed Feb 06, 2019 9:32 pm

My perspective is that if it is required for attendance and graduation and is not specifically listed as an exclusion (e.g., transportation costs) it qualifies.

I have heard many stories of the IRS questioning whether a distribution is used for qualifying expenses, but I've not heard about disputing categories of expenses.

Several times I've received audit letters/inquiries from the IRS (the 1098-T is in the name of the student but I as a parent did the redemption and paid the bills) , but I simply provided them with the 1098 T and a listing of expenses not on the 1098-T, such as room and board. Each time it has been accepted without further questions.

livesoft
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Re: Can I use my own judgment in deciding what is a Qualified Tuition and Related Expense?

Post by livesoft » Wed Feb 06, 2019 9:41 pm

May I ask for what purpose are you wanting to change this? If for AOTC or LLC, don't you have over $10,000 already? If for using 529 money, then 529 money does not need to be just qualified tuition and related expenses. For instance, room & board (on a ship) can be paid with 529 money.
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Dyons
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Re: Can I use my own judgment in deciding what is a Qualified Tuition and Related Expense?

Post by Dyons » Mon Feb 11, 2019 5:50 pm

My apologies for not responding to your replies sooner. (I did not get any notifications about responses being posted, and have now set up for such notifications.)

If I could include the "maintenance fee" as part of Box 1 of the 1098-T received, it would increase the qualified expenses (for AOTC purposes) and would match the 1099-Q received which shows the amount used for all college costs for this child. Without including this, I have a taxable portion of the earnings for the 529 distribution.

The school already included room and board on the ship as a part of the QTRE. The question was if this non-student-specific, mandatory fee is a legitimate QTRE for AOTC and QHHE (qual higher ed expense) for 529.

Does this help? Any further guidance would be much appreciated.

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Kenkat
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Re: Can I use my own judgment in deciding what is a Qualified Tuition and Related Expense?

Post by Kenkat » Mon Feb 11, 2019 7:03 pm

Box 1 on the 1098-T does not have to match what you actually claim. In fact, it usually does not due to books, for example, that are purchased from other sources or other expenses not directly tied to the institution. So, I don’t think this is a red flag. You can probably make a case that the ship maintenance fee is a required fee if questioned in any case.

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