The actual amount of credit depends on the family's income, the amount of qualified tuition and fees paid, and the amount of certain scholarships and allowances subtracted from tuition. To qualify for the credit, the taxpayer must report the amount of tuition and fees paid as well as the amount of certain scholarships, grants, and untaxed income used to pay the tuition and fees. This information will be provided by the student's school. Taxpayers may pay educational expenses in a tax year for an academic period that begins in the first three months of the following the tax year. An Education IRA may be established for any individual.
Contributions are taxable.
Distributions may not be used in conjunction with other tax credits and deductions for the same student. A tax deduction for interest paid on student loans is available on all loans used for a student's educational expenses, not just on federal loans. The borrower must be the taxpayer claiming the deduction. The deduction is limited to the amount of interest paid during the first 60 months of payments on the loan. Itemization is not required to claim the deduction.