1

I am currently a Phd student funded through a Research Assistant position.

Based on my reading of the instructions, the portion of my RA-ship which pays for my tuition is counted as tax-free educational assistance, while the portion of my RA-ship that forms my stipend (and is counted as part of gross income), and is then used for room and board, can be used as part of Adjusted Qualified Education Expenses for the purposes of education tax credits.

Is this an accurate understanding, or have I misunderstood the cryptic text?

  • 1
    How about getting a proper tax preparation service instead of asking questions about every line of your tax return? Just saying.... – littleadv Mar 26 '14 at 4:21
1

I believe you have misunderstood. It says:

Generally, qualified education expenses are amounts paid in 2013 for tuition and fees required for the student's enrollment or attendance at an eligible educational institution.

It then says (emphasis added):

For each student, reduce the qualified education expenses paid in 2013 by or on behalf of that student under the following rules. The result is the amount of adjusted qualified education expenses for each student.

In other words, the "adjusted" qualified expenses may be less than your qualified expenses, but not more. Nothing can be counted in Adjusted Qualified Expenses if it's not counted in Qualified Expenses. Room and board are not qualified expenses in the first place, so you cannot use them to claim these credits. (The part about room and board under adjusted qualifying expenses is saying that, if you can use it for room and board, it is not tax free and thus will not "adjust" your qualified expenses. Basically it is designed so that you either pay tax on it as income, or you can write it off as a tuition expense, but not both, just as in the answer to your previous question.)

The text is also clear here (emphasis added):

However, fees for personal expenses (described below) are never qualified education expenses.

And then it lists room and board as examples of personal expenses.

Just a general tip based on this and your previous question: I would advise you to give up trying to find ways to garner a tax benefit for your grad student salary (RAship, TAship, stipend, etc.). I'm a grad student also and looked into this in my early years. I know it seems like a tantalizing option, but the credits are not for this situation, so you should lower you expectations about their benefit to you. You're already getting a massive tax benefit by receiving a tax-free gift in the form of a tuition waiver. These tax credits are there to help people who pay for tuition out of their own pocket. If you're not paying tuition out of your own pocket, the credit isn't for you.

(In theory, you could still deduct the price of "books and equipment", but it's unlikely that the amount you spent on these warrants the hassle of maintaining the documentation you'd need. Also, you would have to reduce these expenses by the amount of your tax-free assistance, which is likely to be far larger, leaving you with no adjusted qualified expenses left.)

  • While I agree that the credits are not designed for this situation, I also understand the desire to get the maximum tax benefit possible. After all, if Romney and Buffet can pay the least tax legally possible - why shouldn't you? Not only the rich people are allowed to be moochers and free-loaders. – littleadv Mar 26 '14 at 4:30
  • By the way, there are two credits. For one room and board fees are not allowed, for the other (the one the OP is asking about...) they are. – littleadv Mar 26 '14 at 4:31
  • @littleadv: I think you're wrong about that. The difference is only that the Lifetime Learning credit requires the expenses to be paid directly to the school, while the American Opportunity credit doesn't. In the table at the beginning of the document and in the description of qualified expenses, it clearly says that both credits apply only for tuition, fees, and books/supplies/equipment required for study. As in the passage I quoted, it explicitly says that personal expenses such as room and board are never allowed as qualified expenses. – BrenBarn Mar 26 '14 at 4:37
  • Also, re the "not designed for this situation", I don't mean to imply that you shouldn't try for every benefit possible. Basically I'm just saying (as I said to myself several years ago on this matter), "It's not the sweet deal it looks like, so lower your expectations." – BrenBarn Mar 26 '14 at 4:41
0

From the instructions, emphasize at the source:

Generally, any scholarship or fellowship is treated as tax-free educational assistance. However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent the student includes it in gross income (if the student is required to file a tax return) for the year the scholarship or fellowship is received and either:

  1. The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 970, chapter 1;

  2. or The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 970, chapter 1.

So if you (the student) included your scholarship in gross income and by the terms of the scholarship you must or may apply it to room and board (check the terms!), then you can exclude the scholarship from the tax-free educational assistance.

  • This is correct but is only a partial answer. If you can exclude it from tax-free assistance, that only means you don't have to subtract it from your qualified expenses. Since room and board were never qualified expenses in the first place, paying for them with taxable income won't help. – BrenBarn Mar 26 '14 at 4:39
  • 1
    @Bren but the question wasn't whether the expenses are qualified, but whether the money used to pay for it is. As to the qualification of the expenses... Well, I trust the OP will ask us about it in five minutes. – littleadv Mar 26 '14 at 4:47
  • The question was whether "the portion of my RA-ship that forms my stipend (and is counted as part of gross income), and is then used for room and board, can be used as part of Adjusted Qualified Education Expenses". The answer is no, because those are not qualified education expenses. Whether the scholarship that gave you the money was tax-free or not doesn't bear on that question. That is, the question is whether the money can actually be used as part of adjusted qualified expenses, not whether it can be subtracted from qualified expenses in calculating adjusted qualified expenses. – BrenBarn Mar 26 '14 at 4:51
  • @littleadv, Per your comment above, the expenses of room and board are qualified if they are paid for out of a scholarship which may be used to pay for them? – merlin2011 Mar 26 '14 at 4:56
  • @merlin I didn't say that the expense is qualified. See Bren's opinion on that. But if the expense is otherwise qualified - then yes. – littleadv Mar 26 '14 at 5:39

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .