<p>Happykid will need to live off campus when she transfers to Towson U this fall. </p>
<p>If TU uses her Stafford Loan to cover most of the tuition and fees, and we pay the difference, as well as the cost of housing and meals out of our accounts, can we still use the full cost of her tuition and fees when we file for the AOC on the 2012 federal tax return?</p>
<p>OR</p>
<p>Do we need to pay the tuition and fees ourselves (in order to take advantage of the AOC), and ask TU to give her the money from the Stafford for her housing and meal expenses?</p>
<p>In either case, what is the best way for us to document everything?</p>
<p>Many thanks in advance!</p>
<p>If there’s no grant money involved, it doesn’t really matter how it’s allocated. It’s when you get grants/scholarships that it becomes confusing. Both loans and cash out of pocket are treated the same way (as if you paid expenses of pocket).</p>
<p>You’ll just need to keep good records of qualifying expenses (tuition, fees, required textbooks). For source documents, I keep quarterly statements showing tuition and fees, and receipts for all textbooks purchases. I also have an Excel file, by quarter (or semester) and actual payment date, of qualified expenses.</p>
<p>At the end of the year, that makes it pretty easy to match up (or adjust any discrepancies) against the 1098-T. Then you’re ready to go when tax time rolls around, and you can just add up your yearly total and plop it into the education credit form.</p>
<p>If you have tuition/grants, it gets more complicated. In that case, I have another Excel file that shows how I’ve allocated each dollar, and where each dollar came from.</p>
<p>Or maybe I misunderstood your question. I think you meant, is it ok for you, the parent, to take the AOC, when the child is the one who took the loan?</p>
<p>Again, I don’t think the exact details of money source matters-it got paid with cash (or loans). Just save all your receipts and tally up the qualified expenses.</p>
<p>For the AOC, qualified education expenses paid for a dependent for whom you claim an exemption are considered paid by you.</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a>
page 11</p>
<p>I think I understand what is and isn’t a qualified expense. That’s why I’m worried that a loan to the kid that is used to pay the tuition might mean that I the parent would only have evidence that I paid for the books (qualified), meals (unqualified) and housing (unqualified) come tax time. Can I still take advantage of the full cost of tuition if her loan is what paid it?</p>
<p>Yes. As I posted above - qualified education expenses paid for by a dependent for whom you claim an exemption are considered paid by you.</p>
<p>So if she pays her tuition with loans, you treat that as if you paid them for AOC purposes (as long as you claim her as a dependent)</p>
<p>Oh I think I understand swimcatsmom. As long as she’s our tax dependent, we can claim the full tuition even if she’s the one who pays it.</p>
<p>Whew! I do have a good recordkeeping system for the expenses, so that won’t be a problem.</p>
<p>Now to just pin down a (somewhat) affordable apartment close enough to campus. It’s going to be a challenging summer.</p>
<p>Thanks! I knew I’d get the right answer here!</p>