College Education--withdraw.

[ShawnGuy007]

I'm not sure of this one. Can a taxpayer use the education credit or the tuition and fees deduction when they withdrew from school, during the quarter and were reimbursed. I've spent about an hour and a half looking for this information and I can't find it anywhere..
Any help is greatly appreciated.

Thank You

[Koss]

Reimbursed?

Do you mean that the student got a refund of the tuition, after they withdrew?

If they got a refund, then they didn't actually pay tuition and fees.

If they didn't actually pay tuition and fees, they can't take the credit.

If they withdrew from the school and did not get a refund, then they can take the credit, even though they didn't finish the courses.

BMK

[ShawnGuy007]

Thank you Burton.

The student paid, and did not get a refund. Sorry for the confusion...

[Koss]

Withdrawal

See Pub. 970, page 21:

What Expenses Qualify

The American opportunity credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the credit is allowed for qualified education expenses paid in 2010 for an academic period beginning in 2010 or the first three months of 2011.

For example, if you paid $1,500 in December 2010 for qualified tuition for the spring 2011 semester beginning January 2011, you may be able to use that $1,500 in figuring your 2010 credit.

Academic period. An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period.

Paid with borrowed funds. You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account.

Student withdraws from class(es). You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws.

BMK