What exactly is: educational assistance allowances, or other nontaxable sources of income spent for education?
I am trying to determine what I am going to be able deduct for tuition on my taxes because I also had loans. What exactly is educational assistance allowances or other nontaxable sources of income spent for educational purposes? Are loans considered apart of these mentioned categories?
certain education accounts such as ESA (education Savings Accounts), 529 plans and other tax defered plans set up by the IRS. In order to claim them, you must already have a tax defered account set up with a custodian. Also, if you have a student loan, you can claim the itnerest tax free. your loan company will send you tax forms in the mail if that is the case.
A simple way of answering your question is: to get a tax benefit, the educational expenses must be “qualified” asnd you must have paid them with your own “after tax” money.
For the Hope & Lifetime Learning Credits and the Tuition and Fees deduction, qualified expenses are Tuition and REQUIRED fees. Optional fees such as parking do not count.
Paying with your own after tax money means money that is taxable to you, past,present or future. Money out of your bank account was previously taxed. Loans will be repaid with after tax money, so they count as paid by you with your money.
Examples of tuition assistance that is not taxable income to you and thus cannot be counted as “money that tyou paid are” : Employer paid tuition reimbursement plans, scholarships and grants, 529 and Coverdell ESA plans.
In each case the very receipt of these IS the tax benefit.