Tax Experts

Can I Take a Tuition Deduction for Giving my College Student Money?

Q: In 2007, I gave my daughter $2,600 for her first year in pharmacy school. She also received financial aid scholarship money to pay her tuition.

In two 1098-T Forms (one from pharmacy school and one from a community college), the grants are $200 more than tuition. I dare not claim the tuition deduction, right? -- Nhhi P.

Kevin's Answer:

You can only claim the deduction if you paid tuition for your daughter. If the tuition and fees were paid with tax-free scholarships and/or grants, then there is no deduction.

Here's what IRS Publication 970 says on this issue.

Adjustments to Qualified Education Expenses
If you pay qualified education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. You must reduce the qualified education expenses by the amount of any tax-free educational assistance and refund(s) you received.

Tax-free educational assistance. This includes:

The tax-free part of scholarships and fellowships (see chapter 1),

Pell grants (see chapter 1),

Employer-provided educational assistance (see chapter 11),
Veterans' educational assistance (see chapter 1), and

Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.

So, if the money you provided paid for living expenses, for example, it would not qualify you for the deduction.

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