Qualified Education expenses

[Jesse]

An expenditure for a computer qualifies if the computer is needed for enrollment or attendance at the institution.

Does this mean that if you take online courses you can deduct your computer?

I reason not, because the class does not require the computer, but in order to take the class you need a computer, which you could go to your local library and use? Am I incorrect?

Next, I have a full time junior nursing student, she said they are required to purchase a laptop computer to bring to class. If this is the case would the computer be deductible? Would it need to be prorated personal school use?

Edit - Did not necessarily mean deductible, but would the purchase of the computer in either situation qualify as an education expense?

[Bees Knees]

See TTB, page 1-19:

Author’s Comment: The language in the code says
nothing about using the computer, software, and internet
exclusively for educational purposes, nor does it say
how much of the time spent on the computer must be
for educational purposes. As long as the student uses
the computer, other family members (and the student)
can use the computer for personal purposes without having to allocate
the costs between personal and educational use (with the exception of
the cost of sports, games, and hobby software).

[Jesse]

Thanks Bees Knees, I missed that.

So what constitutes "needed"?

[Bees Knees]

The code doesn't say "needed."

The actual law says:

SEC. 1005. COMPUTER TECHNOLOGY AND EQUIPMENT ALLOWED AS
A QUALIFIED HIGHER EDUCATION EXPENSE FOR SECTION
529 ACCOUNTS IN 2009 AND 2010.
(a) IN GENERAL.—Section 529(e)(3)(A) is amended by striking
‘‘and’’ at the end of clause (i), by striking the period at the end
of clause (ii), and by adding at the end the following:
‘‘(iii) expenses paid or incurred in 2009 or 2010
for the purchase of any computer technology or equipment
(as defined in section 170(e)(6)(F)(i)) or Internet
access and related services, if such technology, equipment,
or services are to be used by the beneficiary
and the beneficiary’s family during any of the years
the beneficiary is enrolled at an eligible educational
institution.
Clause (iii) shall not include expenses for computer software
designed for sports, games, or hobbies unless the
software is predominantly educational in nature.’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to expenses paid or incurred after December 31, 2008.

Sounds like the only requirement is that the computer be "used" by the student while enrolled at an eligible educational institution.

[Jesse]

What about the Qualified Education Expenses for the American Opportunity Credit/Hope credit?

Course materials TTB page 12-3 - An expenditure for a computer qualifies if the computer is needed for enrollment or attendance at the institution.

IRS Q & A
Q5. Does an expenditure for a computer qualify for the American opprtunity tax credit?

A. Whether an expenditure for a computer qualifies for the credit depends on the facts. An expenditure for a computer would qualify for the credit if the computer is needed as a condition of enrollment or attendance at the educational institution.

[Bees Knees]

The law itself under the changes for the American Opportunity Credit says:

‘‘(3) QUALIFIED TUITION AND RELATED EXPENSES TO INCLUDE
REQUIRED COURSE MATERIALS.—Subsection (f)(1)(A) shall be
applied by substituting ‘tuition, fees, and course materials’ for
‘tuition and fees’.

In other words, under the old Hope Credit rules, you only got tuition and fees. Now under the new American Opportunity Credit rules, you get tuition, fees, and course materials.

It is the IRS (not the actual law) that is interpreting this rule and saying computers qualify as "course materials." If the IRS is adding computers to this list, it is because computers were added to the list of Section 529 qualifying expenses (which was introduced in the same law). Thus, my interpretation is whatever is meant by saying computers qualify under Section 529, it must also mean the same thing under the American Opportunity Credit.

IRS just can't make stuff up. It has to be based on something.