Education Expense

[lbervin]

I am doing a teachers 1040 and they paid $2500.00 to a qualified institution for a nondependent to help with his education expenses. It is my understanding because he was not a dependent that they do not qualify for the Hope/Life credit. How do I handle this on the 1040? Thanks in advance.

[Mark Goldberg]

Education

You are correct, the teacher can't do anything with the $2500 expense. The student can treat the $2500 as a gift to himand claim the credits on his return.

[lbervin]

education expense

I was wondering if it is possible to take the education expense on Sch A - Qualified Contribution Election.

[Brian EA]

Qualified Contribution Election.

Needs HELP.
What is qualified contribution election

[B C]

Qualified Contribution

See the Tax Book update dated 9/27/05 Katrina Emergency Tax Relief Act. It explain the qualifoed contribution. Esentially it is charitable donations made after August 28,2005 to a chaitable organization. This can be used where AGI limits limited the amount deductible. I don't think it would apply in this case or anything else for that matter.

[Brian EA]

Thanks Bill.

[Ken]

education credit

You are correct, the teacher can't do anything with the $2500 expense. The student can treat the $2500 as a gift to himand claim the credits on his return.

Mark what you're saying is probably true, but I would have to have that one proven to me.
The student is not a dependent of the teacher and the student did not pay the education expenses, the teacher did. How could the student get an education credit for that?
That just sounds a little over the top to me. But then I have been proven wrong about 219 times on the board before. ( or maybe 220)

[Bees Knees]

TTB, page 21-19, "The following transfers are specifically excluded from gift tax. The transfers are not reported on Form 706.

"Qualified transfers for tuition or medical expenses. Payment must be made directly to the school or care provider and not to the beneficiary....Tuition qualifies if paid to a domestic or foreign institution that maintains a regular faculty....The donor and donee do not need to be related...."

The above is applicable because it proves it is still a gift, even though for gift tax purposes, it is not a reportable gift on the gift tax return. But it is still considered to be a gift.

TTB, page 12-3, "Determining Who Paid...If a third party pays qualified expenses directly to a school, the student is treated as receiving the payment from the third party and, in turn, paying the qualified expenses."

Note that this rule is not limited to gifts to dependents. The example in the case of third party payments in behalf of dependents says "Jill's grandmother paid $5,000 tuition directly to Jill's college. Jill also paid tuition of $1,000 with proceeds from a student loan in her name. Jill's parents claim Jill as a dependent. They can use the $6,000 tuition paid by Jill and her grandmother to claim an education credit. They cannot claim a tuition and fees deduction for either payment."

If Jill were not a dependent of her parents, then Jill would have been considered to have paid the expenses paid by the grandmother.