Anyone was familiar with the new educational tax break. Apparently, you can claim up to $3,000 in tution expense. My question is - the IRS says that you can claim "borrowed" funds. Would a student loan count?
This is a new program. I meet all requirements but need clarification on the "borrowed funds" issue. The IRS says you can claim tuition paid with credit cards but I have yet to determine if student loans qualify as "borrowed funds." In my mind they do - but my mind isn't an auditor at the IRS. <edit> HERE IT IS... On page 25 of the 970 Pub - the IRS defines eligible "payments with borrowed funds" - "You can claim a deduction for qualified tuition and related expenses paid with the proceeds of a loan." Here is Penn State's info: http://www.bar.psu.edu/form1098T.html <<<<<INSTRUCTIONS FOR STUDENT Note: The reporting institution is not required to, but may, provide information in boxes 1 through 7 as applicable. An eligible educational institution, such as a college or university, in which you are enrolled must furnish this statement to you. Also, an insurer who makes reimbursements or refunds of qualified tuition and related expenses may, but is not required to, furnish this statement to you. You, or the person who may claim you as a dependent, may be able to take either the tuition and fees deduction or claim an education credit on Form 1040 or 1040A for the qualified tuition and related expenses that were actually paid in 2002. The amount shown in box 1 or 2 may represent an amount other than the amount actually paid in 2002. For more information about the deduction or credit, see Pub. 970, Tax Benefits for Education, Form 8863, Education Credits, and the Form 1040 or 1040A instructions.>>>> It's with IRS Pub. 970 and Form 1098-T. Schools should be sending out 1098-T forms within the next week and apparently those will furnish the information regarding how much was paid. Here is the link to IRS Pub. 970 It's a PDF - starts on page 24 http://www.irs.gov/pub/irs-pdf/p970.pdf
