Can my son claim the principal amt he paid on his student loan as an education expense for his Coverdell ESA distribution? If so, where do I enter that amount?

[dsr]

He received a 1099-Q showing his total Coverdell ESA distribution, and a 1098-E showing the only the interest he paid on his student loan, not the principal. Isn't the principal amount of the student loan a qualified education cost for Coverdell ESA purposes?

[Fern · Accepted solution]

Student loans are not considered qualified higher education expenses for a Coverdell ESA distribution under the current law. You son cannot claim the repayment as an education expense  to offset a Coverdell ESA distribution.

The IRS has stated that if you pay for education expenses with money from a loan, you take can use the education expenses in the year you pay the expenses, not in the year you get a student loan or the year you repay the student loan.