The information below is provided as a free service and we take no responsibility for its accuracy or relevance to any particular taxpayer. You should consult your tax advisor for more details. New proposed regulations provide clarification of how these credits work, what can be included, etc.
Credits reduce tax directly, as opposed to deductions, which only reduce taxable income.
However, the student might be able to take the credit on his or her own return even though another taxpayer paid the expenses . Qualified expenses include tuition and fees required for enrollment or attendance . Books, supplies, and equipment used in a course, as well as nonacademic fees qualify only if they must be paid to the eligible institution for the enrollment or attendance of the student. An education credit generally is allowed only for payments of qualified expenses that cover an academic period beginning in the same tax year as the year that payment is made. However, the regulations provide that expenses paid for an academic period that begins during the first three months of the following year will qualify, and will only be allowed in the year paid.