Questions: Define Qualified Education Expenses and include expenses that do not qualify.

Qualified Education Expenses are specific costs that are necessary for enrollment or attendance at an eligible educational institution. These expenses are often used to determine eligibility for various tax benefits, such as the American Opportunity Tax Credit (AOTC), the Lifetime Learning Credit (LLC), and tax-free distributions from 529 plans and Coverdell Education Savings Accounts (ESAs).

1. Tuition and Fees: The primary expense that qualifies is the cost of tuition and fees required for enrollment or attendance at an eligible educational institution.

2. Books, Supplies, and Equipment: These must be required for courses at the eligible educational institution. For example, if a course requires a specific textbook or lab equipment, these costs are considered qualified expenses.

3. Room and Board: This is qualified only if the student is enrolled at least half-time. The amount cannot exceed the greater of the following two amounts:

   • The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
   • The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.

4. Special Needs Services: Expenses for special needs services incurred by a special needs beneficiary that are necessary for such a beneficiary to enroll or attend an eligible educational institution.

5. Computer and Internet Access: For tax-free distributions from 529 plans, the cost of a computer, peripheral equipment, software, and internet access are considered qualified expenses if they are used primarily by the student during any of the years the student is enrolled at an eligible educational institution.

1. Insurance: Health insurance or other types of insurance are not considered qualified education expenses.

2. Medical Expenses: Costs related to medical care, including student health fees, are not qualified.

3. Transportation: Costs for transportation to and from school are not considered qualified education expenses.

4. Room and Board (if not enrolled at least half-time): If the student is not enrolled at least half-time, room and board expenses do not qualify.

5. Non-required Fees: Fees that are not required for enrollment or attendance, such as optional student activity fees, are not qualified.

6. Sports, Games, and Hobbies: Expenses for education involving sports, games, or hobbies are not qualified unless they are part of the degree program.

For more detailed information, you can refer to the following IRS resources:

• IRS: Qualified Education Expenses
• IRS: About Publication 970

These resources provide comprehensive guidelines on what constitutes qualified education expenses and the specific tax benefits associated with them.