# Qualified Higher Education Expenses: What They Are and How They Work

## What Is a Qualified Higher Education Expense (QHEE)?

A qualified higher education expense (QHEE), as defined by the Internal Revenue Service (IRS), is an expenditure for the costs of higher education that is eligible for a tax credit.

The costs of tuition, books, school fees, and supplies related to enrollment in a college, university, or other post-secondary institution all qualify for credits totaling up to $2,500 a year depending on the parents' modified adjusted gross income.

Room and board costs do not qualify for QHEE credits.

The credit can be claimed by a student, parent, or anyone else who pays the costs.

### Key Takeaways

*   A qualified higher education expense (QHEE) is an expenditure directly related to attendance at a college, university, or other post-secondary institution.
*   Eligible expenses include tuition, books, fees, and supplies such as laptops, but room and board, insurance premiums, and healthcare are not eligible.
*   Filers may apply for the American Opportunity Tax Credit and the Lifetime Learning Credit as an alternative.

## Understanding Qualified Higher Education Expenses (QHEEs)

Tax breaks related to educational costs can be claimed in a number of ways. These include:

*   By claiming a tax deduction of up to $2,500 a year in interest paid on student loans, depending on your modified adjusted gross income.  
    
*   By claiming a QHEE tax credit of up to $2,500 a year on your annual [tax returns](https://www.investopedia.com/terms/t/taxreturn.asp).
*   By making withdrawals from an [IRA](https://www.investopedia.com/terms/i/ira.asp) account before age 59½ without owing the usual 10% early [withdrawal penalty](https://www.investopedia.com/terms/w/withdrawal-penalty.asp).
*   By using distributions from a tax-free account such as a [529 Plan](https://www.investopedia.com/terms/1/529plan.asp) or a [Roth individual retirement account](https://www.investopedia.com/terms/r/rothira.asp) (IRA) for QHEEs.

These tax breaks can be claimed during the tax year and for the first three months of the following tax year.

Qualified higher education expenses are any amounts paid to cover the costs of a student at an accredited post-secondary institution. Expenses covered under this category include tuition, books, materials, supplies—including laptops or notebooks—and other related expenses such as student activity fees.

These costs can be paid by cash, check, credit card, or money from a loan. The fees may or may not be paid directly to an eligible post-secondary institution.

Eligible schools include private, public, for-profit, and nonprofit institutions. All schools send out a [Form 1098](https://www.investopedia.com/terms/f/form_1098.asp)\-T—Tuition Statement for QHEEs to the student for tax purposes.  

## Special Considerations

As noted above, qualified higher education expenses are defined as tuition, fees, books, supplies, and equipment needed to enroll or attend a level of education beyond high school.

These expenses are important because they can determine whether you can exclude the [interest](https://www.investopedia.com/terms/i/interest.asp) on a qualified [savings bond](https://www.investopedia.com/terms/u/ussavingsbonds.asp) from your [taxable income](https://www.investopedia.com/terms/t/taxableincome.asp). Expenses that do not qualify include insurance, medical expenses, student health fees, transportation, personal living expenses, or fees relating to sports activities.

Taxpayers may claim QHEEs for reimbursement under the [American Opportunity Tax Credit](https://www.investopedia.com/terms/a/american-opportunity-tax-credit.asp) (AOTC) or the [Lifetime Learning Credit](https://www.investopedia.com/terms/l/lifelearningcredit.asp) (LLC). The AOTC is capped at $2,500 per student, while the Lifetime Learning Credit is limited to $2,000 per tax return.

The Lifetime Learning Credit is only available to taxpayers with a [modified adjusted gross income](https://www.investopedia.com/terms/m/magi.asp) (MAGI) of $80,000 or less, or $160,000 or less for married couples filing jointly.

> **Fast Fact**
>
> You can use Form 8863—Education Credits to apply for both the American Opportunity Tax Credit and the Lifetime Learning Credit.

Filers can use [Form 8863—Education Credits](https://www.irs.gov/pub/irs-pdf/f8863.pdf) to apply for both credits. It's important to note, however, that you can’t take more than one type of credit for the same student and the same expenses. So, you can't take the AOTC and the LLC for the same student in the same tax year.

## What College Expenses Are Tax Deductible for Parents?

Students or their parents can deduct expenses they pay towards the student's higher education.

*   You can deduct up to $2,500 a year in interest paid on student loans, depending on your modified adjusted gross income.
*   You can claim tax credits for Qualified Higher Education Expenses for yourself, your spouse, or a child that you can claim as a dependant. Tuition, fees, and related expenses all qualify.

## Which College Education Expenses Get Tax Breaks?

College tuition and fees can be used to claim tax credits. Expenses for buying books, laptops, and similar necessities also qualify. You can claim credits for these expenses even if you paid them using a student loan.

You cannot claim credits for room and board, insurance, medical costs, or transportation costs.

## The Bottom Line

Students or their parents can deduct some expenses of higher education and gain tax credits for others up to annual limits set by the IRS.

As always with the IRS, the rules are complex. A qualified tax professional can help you uncover all of the tax breaks you can use to lighten the burdensome costs of higher education.

> **Article Sources**
>
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> 4.  Internal Revenue Service. "[Publication 970, Tax Benefits for Education](https://www.irs.gov/publications/p970)."
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> 5.  Internal Revenue Service. "[Tax topic 456, Student loan interest deduction](https://www.irs.gov/taxtopics/tc456)."
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> 6.  Internal Revenue Service. "[Qualified Education Expenses](https://www.irs.gov/credits-deductions/individuals/qualified-ed-expenses)."
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> 7.  Internal Revenue Service. "[About Form 1098-T, Tuition Statement](https://www.irs.gov/forms-pubs/about-form-1098-t)."
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> 8.  Internal Revenue Service. "[American Opportunity Tax Credit](https://www.irs.gov/credits-deductions/individuals/aotc)."
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