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AOTC credit and TESU residency waiver
#1
If you have paid the ~$3k residency waiver at TESU - did they include it as a qualified educational expense on the 1098-T so you could include it in your tax credit? Were you able to use it towards the $2500 tax credit?

I believe the amount would have been included by TESU in box 1 and/or 2 of the 1098-T.

Info about AOTC tax credit, because someone will ask. ;Wink
100% of the first $2k and 25% of the next 2k up to $2500 total per year for a max of 4 years post-high school.

Tax CREDIT - not a tax deduction that reduces your taxable amount, but a tax credit that reduces the amount of taxes you owe....so if you owed $6k in taxes, and took the whole deduction, you'd only owe $3500 and any overage already paid is refunded.

Only available for first 4 years (half-time or more) post-high school. If you've already completed those in prior years, whether you took the credit or not, even if not available, you can't claim it. Do the Lifelong instead (less beneficial, but better than nothing, less limits). 

Q&A
https://www.irs.gov/credits-deductions/i...nd-answers

Qualified Expenses:
https://www.irs.gov/credits-deductions/i...%20expense.

Old article included to show the 1098-T, so you can see the boxes I'm talking about:
https://www.forbes.com/sites/kellyphilli...7f4ee65233

I'm not a tax professional - not even close. ;Wink  Just asking a question for my own knowledge. Trying to make a contingency plan for hubby's degree if the company opts not to pay for it.
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#2
Thank you for sharing this info!  :-)
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  • alab21
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#3
Following up. Did anyone pay the residency waiver at TESU in 2019? Could you check your 1098-T to see if it’s included in box 1 and/or 2 and let me know? As far as I can tell, if it’s included in those boxes, it’s a qualified expense with the IRS. (I’ll double check before filing).


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#4
Yes, you can include this. I’m not sure why no one has posted anything regarding this before. Sounds like a lot of people are missing out on free money..
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#5
(12-21-2020, 11:15 PM)harrypotter Wrote: Yes, you can include this. I’m not sure why no one has posted anything regarding this before. Sounds like a lot of people are missing out on free money..


You’ve paid the waiver and successfully claimed the AOTC credit? Or you checked the boxes I requested on the 1098-T? Just making sure what your basis for the affirmative answer is. Smile And thank you for replying!


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#6
Please consult your tax advisor. The residency waiver fee is not a qualified education expense. There IS a reason TESU did not include it.

Pub 970 includes the definition of qualified education expense. The operative word in the definition is “required for enrollment or attendance.”

In other words, you incurred the expense simply by enrolling at the school or attending a class - as did all other students.

The residency waiver is an optional fee.

You can look on page 13.

Source: IRS pub 970 and my 15 years at IRS, where I taught new hires their 4 month basic income tax law course.

https://www.irs.gov/pub/irs-pdf/p970.pdf


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(12-21-2020, 11:15 PM)harrypotter Wrote: Yes, you can include this. I’m not sure why no one has posted anything regarding this before. Sounds like a lot of people are missing out on free money..


This is incorrect.


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#7
Not tax advice. For entertainment and discussion purposes only.

TESU should mail or provide via download a 1098-T. If the residency fee waiver qualifies, it should be included on that form. If anybody has received this already with the residency waiver included, this would answer the question.

However, the rules for the AOTC, Student loan interest deduction, and Liftetime Learning Credit, etc are different. For example:

For AOTC only, expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school.
(https://www.irs.gov/credits-deductions/i...d-expenses)

I raise this example because some expenses qualify under AOTC, but not Lifetime Learning Credit, etc. It is also important to note that not all fees are deductible, even if required and or paid directly to the school.

The residency-waiver fee is interesting because it is technically not mentioned specifically, nor are graduation fees. The bigger issue is that not everyone is required to pay them -- leading me to believe that a residency-waiver fee (an anomaly, really) would not be covered. However, I'm not sure if these fees typically get reported on the the 1098-T forms anyway because perhaps the rules were never meant to split such hairs -- you expect people to pay what they need to in order to graduate.

If TESU got the okay from the IRS to include this on the form at one point, I would think it would be fair game. If I had to guess, I would say that it does NOT qualify, but I could see an argument being made. Consider how this is different from SSAF fees and Enrollment fees at Excelsior. Seems unfair that those similar fees could (potentially) qualify, where TESU's do not. This also makes it murky because the fee at TESU is almost a delayed enrollment fee required for graduation. Though, it technically only applies to some people ...

Anyway, my guess would be that the TESU residency fee would not be included as part of tuition and fees. Curious what has happened in the past. Also, it's interesting and another consideration for anyone needing a tax break for these fees.
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#8
(12-22-2020, 07:42 PM)udi Wrote: Not tax advice. For entertainment and discussion purposes only.

TESU should mail or provide via download a 1098-T. If the residency fee waiver qualifies, it should be included on that form. If anybody has received this already with the residency waiver included, this would answer the question.

However, the rules for the AOTC, Student loan interest deduction, and Liftetime Learning Credit, etc are different. For example:

For AOTC only, expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school.
(https://www.irs.gov/credits-deductions/i...d-expenses)

I raise this example because some expenses qualify under AOTC, but not Lifetime Learning Credit, etc. It is also important to note that not all fees are deductible, even if required and or paid directly to the school.

The residency-waiver fee is interesting because it is technically not mentioned specifically, nor are graduation fees. The bigger issue is that not everyone is required to pay them -- leading me to believe that a residency-waiver fee (an anomaly, really) would not be covered. However, I'm not sure if these fees typically get reported on the the 1098-T forms anyway because perhaps the rules were never meant to split such hairs -- you expect people to pay what they need to in order to graduate.

If TESU got the okay from the IRS to include this on the form at one point, I would think it would be fair game. If I had to guess, I would say that it does NOT qualify, but I could see an argument being made. Consider how this is different from SSAF fees and Enrollment fees at Excelsior. Seems unfair that those similar fees could (potentially) qualify, where TESU's do not. This also makes it murky because the fee at TESU is almost a delayed enrollment fee required for graduation. Though, it technically only applies to some people ...

Anyway, my guess would be that the TESU residency fee would not be included as part of tuition and fees. Curious what has happened in the past. Also, it's interesting and another consideration for anyone needing a tax break for these fees.

To your example of the Excelsior enrollment fee, if all students incur the fee simply by enrolling in the school, then it is likely a "required" fee.  The TESU residency waiver fee is a voluntary fee - you either take 16 semester hours  at TESU OR you pay the fee.  No student is required to pay the residency waiver fee to take a class at TESU or required to pay it merely by enrolling there as a student.  It is, in fact, a fee to avoid incurring tuition....

Is there a similar set up for Excelsior's fee?  Likely not, as it is an annual enrollment fee.

US Tax Court has historically construed the AOTC and it's predecessor the Hope Credit with greater than average deference to the Commissioner's decisions in allowing or disallowing the credit.  I believe this is due to the presence of the documentation of the school.  Tax Court seems to adopt the view that the taxpayer has incentive to stretch the limits of the credit while the Service has incentive to contract it; the school has no bias. The 1098T would likely be impossible to refute in an audit or tax court case.  

I would argue that the residency waiver fee is NOT required tuition or related student fees for the purposes of the credit.  In terms of credits, and especially refundable credits, if an expense is not specifically included, it is excluded.  

While I encourage anyone to consult their own tax advisor, my experience in tax administration leads me to conclude it is not able to be used.
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#9
(12-22-2020, 07:42 PM)udi Wrote: Not tax advice. For entertainment and discussion purposes only.

TESU should mail or provide via download a 1098-T. If the residency fee waiver qualifies, it should be included on that form. If anybody has received this already with the residency waiver included, this would answer the question.

However, the rules for the AOTC, Student loan interest deduction, and Liftetime Learning Credit, etc are different. For example:

For AOTC only, expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school.
(https://www.irs.gov/credits-deductions/i...d-expenses)

I raise this example because some expenses qualify under AOTC, but not Lifetime Learning Credit, etc. It is also important to note that not all fees are deductible, even if required and or paid directly to the school.

The residency-waiver fee is interesting because it is technically not mentioned specifically, nor are graduation fees. The bigger issue is that not everyone is required to pay them -- leading me to believe that a residency-waiver fee (an anomaly, really) would not be covered. However, I'm not sure if these fees typically get reported on the the 1098-T forms anyway because perhaps the rules were never meant to split such hairs -- you expect people to pay what they need to in order to graduate.

If TESU got the okay from the IRS to include this on the form at one point, I would think it would be fair game. If I had to guess, I would say that it does NOT qualify, but I could see an argument being made. Consider how this is different from SSAF fees and Enrollment fees at Excelsior. Seems unfair that those similar fees could (potentially) qualify, where TESU's do not. This also makes it murky because the fee at TESU is almost a delayed enrollment fee required for graduation. Though, it technically only applies to some people ...

Anyway, my guess would be that the TESU residency fee would not be included as part of tuition and fees. Curious what has happened in the past. Also, it's interesting and another consideration for anyone needing a tax break for these fees.
Claim it as a donation  Big Grin  No, just kidding. 

If it was ever on the form at any point in the past, it establishes precedence and if it isn't specified anywhere of any changes then students could actually make a point to include it. But one has to be able to prove it and able to provide proof that no changes have occurred that preclude doing so.
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#10
(12-22-2020, 08:53 PM)BrianFallon Wrote:
(12-22-2020, 07:42 PM)udi Wrote: Not tax advice. For entertainment and discussion purposes only.

TESU should mail or provide via download a 1098-T. If the residency fee waiver qualifies, it should be included on that form. If anybody has received this already with the residency waiver included, this would answer the question.

However, the rules for the AOTC, Student loan interest deduction, and Liftetime Learning Credit, etc are different. For example:

For AOTC only, expenses for books, supplies and equipment the student needs for a course of study are included in qualified education expenses even if it is not paid to the school.
(https://www.irs.gov/credits-deductions/i...d-expenses)

I raise this example because some expenses qualify under AOTC, but not Lifetime Learning Credit, etc. It is also important to note that not all fees are deductible, even if required and or paid directly to the school.

The residency-waiver fee is interesting because it is technically not mentioned specifically, nor are graduation fees. The bigger issue is that not everyone is required to pay them -- leading me to believe that a residency-waiver fee (an anomaly, really) would not be covered. However, I'm not sure if these fees typically get reported on the the 1098-T forms anyway because perhaps the rules were never meant to split such hairs -- you expect people to pay what they need to in order to graduate.

If TESU got the okay from the IRS to include this on the form at one point, I would think it would be fair game. If I had to guess, I would say that it does NOT qualify, but I could see an argument being made. Consider how this is different from SSAF fees and Enrollment fees at Excelsior. Seems unfair that those similar fees could (potentially) qualify, where TESU's do not. This also makes it murky because the fee at TESU is almost a delayed enrollment fee required for graduation. Though, it technically only applies to some people ...

Anyway, my guess would be that the TESU residency fee would not be included as part of tuition and fees. Curious what has happened in the past. Also, it's interesting and another consideration for anyone needing a tax break for these fees.

To your example of the Excelsior enrollment fee, if all students incur the fee simply by enrolling in the school, then it is likely a "required" fee.  The TESU residency waiver fee is a voluntary fee - you either take 16 semester hours  at TESU OR you pay the fee.  No student is required to pay the residency waiver fee to take a class at TESU or required to pay it merely by enrolling there as a student.  It is, in fact, a fee to avoid incurring tuition....

Is there a similar set up for Excelsior's fee?  Likely not, as it is an annual enrollment fee.

EC also has an Enrollment Fee for anyone who doesn't take at least 12cr there.
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