Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Qualified Higher Education Expense

What it is:

Generally, a qualified higher education expense is tuition or a tuition-related expense paid to a post-secondary institution.

How it works (Example):

For example, let's assume that John pays $48,000 in tuition and fees for a year at State University. Those expenses are qualified higher education expenses.

Eligible expenses include tuition, fees, books, supplies, equipment, and room and board. According to the IRS, qualified higher education expenses must be required by the school. In many cases, the student must be enrolled at least half-time.

It is important to note that the expenses must come from an eligible educational institution: that is, one that is eligible to participate in a student financial aid program under Title IV of the Higher Education Act of 1965. Most colleges, universities, and community colleges are eligible.

Why it Matters:

Qualified higher education expenses are deductible in some tax situations (though a taxpayer cannot deduct higher education expenses and also take an education credit such as the Lifetime Learning Credit). Additionally, withdrawals from IRAs and other investment vehicles are permitted without penalty if they are for qualified higher education expenses.