Education

Right, only expenses required to obtain the degree count as ''qualified education expenses''.    If it is required for the degree, it is a qualified education expense.  Some examples of expenses that arise when taking the American Opportunity Credit or the Lifetime Learning Credit are as follows:  

You can deduct: 

• Tuition
• Enrollment fees
• Expenses paid to the school, on condition of enrollment (lab fees, for example)
• Certain books, supplies, and course-related equipment - if required for the course or degree
• Expenses listed above (for the following semester), as long as the semester begins in the first three months of 2021
• Education expenses paid with cash, checks, credit cards, and savings accounts
• Education expenses paid with loans, gifts, and inheritances

You can't deduct:

• Room and board - 529 funds can be used - up to the school's Cost of Attendance (COA) for the academic period.  Each school publishes its own costs.  
• Fees for non-degree courses (sports, games, or hobbies), except when the course or activity is part of the student’s degree program.  For the Lifetime Learning Credit only, these expenses qualify if the course helps the student acquire or improve job skills.
• Insurance
• Medical expenses or student fees
• Transportation or mileage
• Fees for maintaining or acquiring a license (broker, CPA, etc.) 
• Undergraduate and graduate application fees

If the 1099-Q distribution doesn’t exceed the amount of the student's qualifying expenses, then you don't have to report any of the distribution as income on your tax return. If the distribution exceeds these expenses, then you must report the earnings on the excess as "other income" on your tax return.   When you pay a student’s school expenses with these funds, you cannot claim a tuition deduction or either of the educational tax credits for the same expense.