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Author: kljorgensen One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121596  
Subject: Re: Are my education expenses "qualified&qu Date: 1/21/2005 7:35 AM
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Ben,

It has been a few years since I was a grad student but the way it worked then was that part of my fellowship paid for tuition and part paid me. The part that paid tuition was tax free and I never saw any of the money except on a form at the end of the year. The other part paid a stipend and was taxable. I would guess that $24k is the non-income, tax free part. As such it may be a "qualified expense" but you can't use it as a deduction since it wasn't income. In essence, you already got the tax benefit on the tuition funds. Read IRS doc 970 http://www.irs.gov/publications/p970/index.html

From the IRS doc 970:

If you pay qualified education expenses with certain tax-free funds, you cannot claim a credit 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 parts 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.


klj
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