What education expenses qualify for the Hope credit and lifetime learning credit?
Generally, both the Hope credit and lifetime learning credit apply to tuition paid for enrollment or attendance at a post-secondary education institution, such as a college. The tuition must have been paid in the tax year you are claiming the credit for and it must be for coursework taken during that same tax year. The only exception to this requirement is that you can prepay for classes that will begin in the first three months of the following year and still apply that tuition to either credit. For example, if you paid the winter 2007 tuition fees in December 2006, you can apply those payments to either education credit for your 2006 taxes, even though the student did not begin taking classes until early 2007.
Aside from tuition, the only other expenses which are generally applicable are those fees which you are required to pay in order for the student to be allowed to attend the educational institution. For example, if a college requires that you pay a student activities fee, that fee can be included as an education expense. But you cannot include expenses towards room and board, insurance, transportation, etc. Similarly, you cannot include expenses for sports or noncredit courses unless they are a part of the student’s degree program.
Finally, any qualified expenses must be reduced by any tax-free educational assistance you have received, such as Pell grants, tax-free assistance provided by an employer or certain scholarships or fellowships.