Tuition paid by V Adm

[MN dhawk]

Client gives me a 1098T showing $5000 in tuition paid and says the VA paid it directly due to disability. Nothing is in the scholarship grant box. Does he qualify for an education credit?? Thanks.

[Gail in Virginia]

Did you not like Lion's answer? I agree with her - if he did not pay it, he cannot claim it. No credit for him.

[jainen]

>>if he did not pay it, he cannot claim it<<

According to the instructions to Form 8863, this question can be answered by referring to Pub 970. Chapters 2 and 3 (AOC and LLC) tell us "Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you."

But when you get to Tuition and Fees Deduction in Chapter 6 it changes. "Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student’s qualified education expenses. In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. If you claim, or can claim, an exemption on your tax return for the student, you are not considered to have paid the expenses and you cannot deduct them. If the student is not a dependent, only the student can deduct payments made directly to the institution for his or her expenses. If the student is your dependent, no one can deduct the payments."

Original post was about education credits, not the deduction, so I disagree with the other two answers.

[Lion EA]

So, if my employer pays my school directly, I can still claim education credits for amounts paid by that third party? It's not income to me, but I still get the deduction? Cool. Same if my church paid some to my college toward my tuition? Or, my grandfather?

And if I were still a dependent of my mother, she can claim credits for tuition paid by my employer, church or grandfather?

[Gail in Virginia]

I learn something every day.

[jainen]

>>my church paid some to my college toward my tuition<<

That's a pretty good score, but not as sweet as the guy in the original post who got the GOVMINT to pay for his tax break!

[Hahn1040]

NO DOUBLE DIPPING

Pub 970 Chapter 1: Veterans benefit

Veterans' Benefits

Payments you receive for education, training, or subsistence under any law administered by the Department of Veterans Affairs (VA) are tax free. Do not include these payments as income on your federal tax return.

If you qualify for one or more of the education benefits discussed in chapters 2 through 12, you may have to reduce the amount of education expenses qualifying for a specific benefit by part or all of your VA payments. This applies only to the part of your VA payments that is required to be used for education expenses.

You may want to visit the Veteran's Administration website at www.gibill.va.gov for specific information about the various VA benefits for education.

Example.

You have returned to college and are receiving two education benefits under the latest GI Bill: (1) a $1,534 monthly basic housing allowance (BAH) that is directly deposited to your checking account, and (2) $3,840 paid directly to your college for tuition. Neither of these benefits is taxable and you do not report them on your tax return. You also want to claim an American opportunity credit on your return. You paid $5,000 in qualified education expenses (explained in detail in <a href="http://www.irs.gov/publications/p970/ch02.html#en_US_2010_publink1000204341" name="en_US_2010_publink1000239102" style="line-height: 14px; color: rgb(102, 28, 128); " title="Qualified Education Expenses">chapter 2). To figure the amount of credit, you must first subtract the $3,840 from your qualified education expenses because this payment under the GI Bill was required to be used for education expenses. You do not subtract any amount of the BAH because it was paid to you and its use was not restricted.

[Lion EA]

I'm self-employed, my church is struggling, and my parents and grandparents are dead. If YOU want to contribute to my education, I'll give you my address! But I can't make any of those situations work for me. Just trying to understand how best to serve my clients.