Many folks get confused becuase while the IRS works in calendar years, schools work in academic years. So the reality is, it takes you five calendar years to get that four year degree. But the IRS has really made it simple.
- Qualified education expenses are claimed as such in the tax year they are actually paid. It *does* *not* *matter* what tax year is paid *FOR*.
- Scholarships, grants, 529 distributions are claimed/reported as taxable income (initially) in the tax year they are received. It *does* *not* *matter* what tax year that money is *FOR*. (The taxability of scholarships, grants and 529 distributions are offset/cancelled out by the qualified education expenses they are used to pay for.)
