Do i include the school tuition if it was paid by the hazlewood act (military)

[pinkjo08]

The Hazelwood Act paid for my husbands graduate schooling, but we still paid for fees, others. Do we still include this number on our return?

[hbl3973]

As those funds covered qualified tuition expenses, they are not applicable to the Lifetime Learning Credit.  However, out of pocket expenses such as fees, books, etc. (qualified expenses listed in IRS Publication 970 https://www.irs.gov/pub/irs-pdf/p970.pdf) do qualify for the credit.  Room and board expenses don't.

[hbl3973]

I would further note that the fees, books, etc. expenses are only applicable if paid directly to the educational institution.  This is different than the American Opportunity Credit where you could, for example, buy books at Amazon and use that out of pocket expense for AOC credit.

[Jcke]

One of the turbo tax questions when claiming the tuition credit is have you received any scholarships, grants or VA benefit. My son’s university tuition was covered by the Hazelwood act. We did have to pay out of pocket for the student fees to the university. Since the Hazelwood is specific to the state of Texas and the universities absorb the cost, Im Not sure if we have to answer “yes” to that question have you received VA benefits? I tried answering both ways. When answered “no” I received tax credit for the fees I paid however when I approximated the tuition fees and filled in the box I received nothing. Our 1098 is blank under the tuition and grant box.

[Hal_Al]

@Jcke  - If box 1 of the 1098-T is blank, it means the student fees you paid were not qualified expenses (e.g. student activity fees) for the tuition credit.  You are not eligible, so just don't enter the 1098-T or any educational expenses

[Jcke]

Box #1 does have a amount, let’s say $500. Then what in regards to the Hazelwood exemption?

thanks

[Hal_Al]

Assuming box 5 is 0, you can claim the $500 toward the credit.

Answer no to the veterans benefits question, as the Hazelwood Act is a tuition remission thing, and not a payment to either the student or the school. 

[Jcke]

Hal_Al

I love your advice for me as it would definitely get me money back on my return. But I’m worried about being wrong and having to refund the IRS (with interest). When thinking about it, my concern is that even with the fact there was no actual money exchanged (Hazelwood benefit to University) that the tuition does have a value and would the IRS look at it in that way.  Is your recommendation a layman opinion or do you have a professional back round in taxes. Can you recommend where I might find the information? I’ve searched through IRS tuition info, I could not find anything clear-cut. Thank you

[Hal_Al]

Scholarships are tax free if used for qualified expenses. 

Federal veterans benefits are tax free because congress says so, even if used for room & board. 

Tuition remission is tax free, because Publication 970 says so.

I'm not personally familiar with Texas Hazelwood, but did "google" it and am confident in my answer.  The IRS  doesn't question the 1098-T. It's all you need for proof.

[Carl]

I assume you are filing as Married Filing Joint. References to "you", "your", "yours", "his" or "hers" means both of you.

Monies awarded by the Hazelwood Act are a scholarship. But  take special note that this does not include living expenses, books, or supply fees. It's specifically designated for tuition only. This is clearly stated on the website at https://www.va.txstate.edu/benefits/hazlewood.html

Qualified education expenses that are not paid with money you earned either from a W-2 job or self-employment is considered third party income. This includes scholarships, grants, 529 distributions, gifts from Aunt Mary, etc.

For the most part, all third party income is treated as scholarships and/or grants. 529 distributions are third party, but get a little different treatment. I will not discuss 529 distributions since there is no indication you received any 529 distributions.

Not all scholarships/grants will be included in box 5 of the 1098-T. Likewise, not all qualified education expenses will be included in box 1 of the 1098-T either. Just enter the 1098-T "EXACTLY" as printed. Then followup screens will ask you for other 3rd party income and qualified expenses not included on the 1098-T.

Qualified education expenses are tuition, books, and lab fees. That's it with no exception.

Tuition - Includes enrollment fees, registration fees and any other fee that was paid as a requirement to complete the course.

Books - What was paid for the books required for the course. These books are usually identified in the course syllabus.  Note that for "GRADUATE" classes books are not a deductible expense. Books are only deductible for an undergraduate course.

Lab fees - This category can be rather broad, so if you're wondering if a specific expense qualifies as a lab fee, just ask. For example, if a computer was needed to complete course work and you went out and purchased a computer (desktop or laptop) for the *PRIMARY* purpose of meeting the course requirements, then the cost of the computer can be included as a lab fee. Likewise, if internet access in your home was required to complete online course requirements and you obtained that access for the *PRIMARY* purpose of meeting those requirements, then the cost of Internet access for the term of that course would be deductible as a lab fee. This would include the cost of hookup too.

However, if your home already had internet access prior to the earliest enrollment date, then it's primary purpose was not to meet course requirements and none of the Internet cost is deductible as a lab fee.