Qualified education expenses under the American Opportunity Tax Credit are basically tuition, fees and course materials.
The tuition must be paid to an eligible educational institution. An “eligible educational institution” is generally any accredited public, nonprofit or proprietary (private) college, university, vocational school or other postsecondary institution.
Student activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. Student health fees are not included as part of this expense. They are considered a medical expense.
Course materials include books, equipment and supplies. You do not have to purchase these items directly from the school to include them. Books included in the credit are the textbooks needed for the course. Supplies include highlighters, pens, pencils, etc. An example of equipment is a laptop computer.
If you do not purchase your course materials from the university bookstore, those qualified education expense items will not be included on the Form 1098-T that you receive from the university. You will need to enter these expenses – in addition to the expenses listed on the Form 1098-T – when preparing your income tax returns.
Qualified education expenses never include personal expenses. Room and board, insurance, medical expenses, transportation and similar personal, living or family expenses are examples of personal expenses.
The amount of qualified education expenses is reduced by the amount of a qualified scholarship, which is excluded from gross income. The amount of the scholarship will be provided to you on Form 1098-T.