Qualified Higher Education Expense


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Qualified Higher Education Expense

Tuition and related expenses that one pays to a university, college, technical school, or other post-secondary institution. Most of the time, qualified higher education expenses are tax deductible, and one may also be able to deduct the interest on savings bonds if the proceeds are used to pay for these expenses. See also: 529.
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* If a beneficiary receives distributions from both a Coverdell account and a qualified tuition program in the same year and the total distributions from both are more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the two distributions to determine how much of each distribution is taxable.
A qualified tuition program is a program established and maintained by a state (or agency or instrumentality thereof) or by one or more "eligible educational institutions" (see below) that meet certain requirements (see below) and under which a person may buy tuition credits or certificates on behalf of a designated beneficiary (see below) that entitle the beneficiary to a waiver or payment of qualified higher education expenses (see below) of the beneficiary.
(39) Fifth, a program must contain adequate safeguards to prevent contributions on behalf of a beneficiary in excess of those reasonably necessary to provide for the qualified higher education expenses of the beneficiary.
Generally, the amount of the qualified higher education expenses otherwise taken into account under IRC Section 135(a) with respect to the education of an individual is reduced by the amount of the qualified higher education expenses taken into account in determining the credit allowable to the taxpayer or any other person under the rules for the Hope and Lifetime Learning credits with respect to qualified higher education expenses.
To be eligible for this tax treatment, withdrawals may be used to pay qualified higher education expenses only: tuition, fees, books, supplies, equipment and room and board under certain circumstances.
A qualified tuition program (QTP) is a program established and maintained by a state (or agency or instrumentality thereof) or by one or more "eligible educational institutions" (see below) that meet certain requirements (see below) and under which a person may buy tuition credits or certificates on behalf of a "designated beneficiary" (see below) that entitle the beneficiary to a waiver or payment of "qualified higher education expenses" (see below) of the beneficiary.
Earnings in the account grow free of federal and Wisconsin state taxes and can be used to pay for qualified higher education expenses.
There is no penalty for early withdrawal of IRA funds for first-time homebuyers and qualified higher education expenses incurred by the IRA owner, spouse, child or grandchild of the owner or spouse.
Investments in so-called "529 college savings plans" can be used for qualified higher education expenses including tuition, room, board and textbooks.
On the other hand, if a child is not claimed as a dependent by the parent (or by any other taxpayer) for the taxable year, then the child has the option of electing either the Hope Scholarship or Lifetime Learning Credit for qualified higher education expenses paid during that year.
Current law states that Section 529 distributions that ate used to pay qualified higher education expenses are exempt from federal income tax.
* used for qualified higher education expenses incurred by the IRA holder or an immediate family member

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