Hope Credit

[swimcatsmom]

<p>There is a lot of disagreement about this. In IRS 970 The rule for taxability of scholarships says qualified expenses include tuition/fees and required books. For the Hope credit the rule says that qualified expenses include tuition/fees and required books that are required to be purchased through the school. Some people interpret the Hope credit rule and think it applies to the scholarship taxability rule. As each education tax benefit has separate rules I don’t know why people read the Hope rules and apply it to the scholarship rules (for instance room and board is allowed for 529 account withdrawals but not for other benefits). Most tax guide books say required books are allowed for scholarships. (I am not a tax accountant).</p>

<p>From the IRS website
[ITG</a> FAQ #1 Answer-Are amounts paid to students for scholarships taxable and if so, how do we report them?](<a href=“http://www.irs.gov/govt/tribes/article/0,,id=185504,00.html]ITG”>http://www.irs.gov/govt/tribes/article/0,,id=185504,00.html)</p>

<p>

A qualified scholarship is defined as any amount expended for “qualified tuition and related expenses.” Qualified tuition and related expenses are tuition and fees required for the enrollment or attendance of a student at an educational institution, fees, books, supplies and equipment required for courses of instruction at such educational organization.

</p>

<p>From IRS970 page 6(for allowable expenses when calculating taxability of scholarships)
<a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf&lt;/a&gt;

• Tuition and fees required to enroll at or attend an
eligible educational institution, and
• Course-related expenses, such as fees, books, sup-
plies, and equipment that are required for the
courses at the eligible educational institution. These
items must be required of all students in your course
of instruction.

</p>

<p>From page 12 related to the Hope tax credit

Related expenses. 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.

</p>

<p>For 2009 and 2010 the new tax credit does allow books so perhaps that will reduce the confusion for future years.</p>

<p>Computer equipment will be allowed as a qualified expense in 2009 & 2010 tax years for 529 account withdrawals.</p>