Specifically, I want to talk about records and receipts for your back-to-school expenses. Nope I’m not talking about that cute dress or awesome backpack you bought for the first day of school. I want to talk about college expenses; tuition, fees, books, supplies and room and board. And it doesn’t matter if the student is a young person going full time or a parent picking up a class or going back part time or either in a graduate program, you should to keep records of what you spend for you education and what you receive in the way of grants and scholarships.
Congress has created several tax programs to help parents and/or students with college expenses. There are credits like the American Educational Opportunity Credit and Lifetime Learning Credits, the Higher Education Tuition Deduction, educational IRAs and the Qualified Tuition Program (QTP). All of them have different qualifications and cover different expenses. And I’m not going to cover them right now. I want to get you thinking about keeping track of school expenses and income while you’re spending the money. The basic ideas apply to most programs and should get you set come tax time. Then we can figure out which program you qualify for.
The burden of proving you qualify for the programs rest with you and you need to keep records.
It doesn’t matter if you might qualify for a credit or deduction or need to show that withdrawals are for educational expenses, you need to be proactive about keeping records. Don’t rely on the 1098T that the college will send out. Schools have gotten more accurate completing the 1098T but they can be misleading.
What do you need to keep?
- Receipts for books, supplies needed for school and tuition and fee payments. Don’t rely on credit card statements, keep the receipt. Right now this can include a computer (but not school tee shirts or beer.)
- Receipts from textbook buy back and other returns.
- Amounts for scholarships, grants and student loans even if the school is handling the money. (Actually, especially if the school is handling the money.)
- What money is being pulled out of educational IRAs and QTPs.
- If money is coming from Ed IRAs and QTPs, room and board needs to be tracked too.
- If there is more than one student, keep expenses for each separate.
- Most schools have account info online and that can be helpful but don’t rely on it. It may not have everything and you still need the receipts for bookstore purchases. This is supposed to be changing for 2016 tax year (we’ll see) but for now keep receipts.
- And teachers, don’t forget your classroom supplies receipts (hopefully this will be back.)
These records will allow me (or your tax preparer) to accurately calculate the different educations programs and how they affect your taxes and use which program is best for your situation. Believe me; it’s better to put the info aside as you get it than to try to find it in February. Especially if you need your taxes prepared ASAP because you forgot the FASFA deadline.