Prepay College Tuition for Next Year (Year-End Tax Tips)
Tuesday December 30, 2008
Tuition paid this year for courses beginning in the first three months of next year will qualify to be deductible this year. This applies to the tuition and fees deduction, and the Hope and the Lifetime Learning tax credits.
The IRS explains in Publication 970 that the deduction or tax credit "is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Generally, the credit is allowed for qualified education expenses paid in 2007 for an academic period beginning in 2007 or in the first 3 months of 2008." The same rules apply for expenses paid in 2008.
Comments
My college is closed for the holidays. Can I still claim a credit for a payment postmarked 2008 even though the college won’t process it until 2009 or does it depend on what’s on the 1098-T?
That’s a good question! As long as you can prove that you paid the expense this year, the deduction should be allowed. But, as you point out, the IRS typically relies on the 1098-T document to substantiate how much was paid during the year.
Regarding your comment re the 1098T, it has been my experience as a Tax Pro that MOST univesities fill in Box 2 (amount BILLED in a year) and NOT Box 1, Amount PAID in a year.
Therefore if your school uses Box 2, you should be OK with your numbers.
If I pay in 2007 (say on Dec 30 of 2007) for an academic period beginning in 2008, can I include this amount into the deduction on my 2008 return?
Yes, Alex, you can take this as a deduction on your 2008 return. You might be able to take this as a deduction on your 2007 return instead. Figure out which will produce the best refund.
What if you paid your 2008 tuition late, in 2009. Can you claim this your 2009 return or since the tuition was due in 2008 it can only be on the 2008 return.