Definitions

In December 2002, the Internal Revenue Service (IRS) issued final regulatory information on 1098-T reporting. The regulations provide that a claimed dependent is a dependent (as defined in section 152) for whom a deduction under section 151 is allowed on the taxpayer's federal income tax return for the taxable year in which the credit is claimed.

Based on the requirements of section 25A(f)(2), the regulations provide that an eligible educational institution means a college, university, vocational school, or other post-secondary educational institution that: (1) Is described in section 481 of the Higher Education Act of 1965 (HEA) (20 U.S.C. 1088) as in effect on August 5, 1997 (generally all accredited public, nonprofit, and proprietary post-secondary institutions); and (2) participates in a federal student financial aid program under title IV of the HEA (20 U.S.C. 1070 et seq.) or is certified by the Department of Education as eligible to participate in such a program but chooses not to participate.

The regulations provide that academic period means a quarter, semester, trimester, or other period of study (such as a summer school session) as reasonably determined by the eligible educational institution. Neither section 25A nor its legislative history defines the term academic period. Additionally, the Department of Education does not have a recognized definition of academic period. The definition in the regulations is intended to include institutions that use traditional academic terms and institutions that do not use academic terms, but for example use clock hours or credit hours.

Based on the definition in section 25A(f)(1), the regulations define qualified tuition and related expenses as the tuition and fees required for the enrollment or attendance of a student for courses of instruction at an eligible educational institution. This definition is generally consistent with the definition of tuition and fees contained in section 472(1) of the HEA (20 U.S.C. 108711(1)). (See H.R. Conf. Rep. No. 599, 105th Cong., 2d Sess., at p.321 (1998). The regulations provide that, in general, the test for determining whether a fee is treated as a qualified tuition and related expense is whether the fee is required to be paid to the eligible educational institution by students as a condition of the students' enrollment or attendance at the institution. The regulations specifically provide that qualified tuition and related expenses include fees for books, supplies, and equipment used in a course of study only if the fees must be paid to the eligible educational institution for the enrollment or attendance of the student at the institution. Similarly, the regulations provide that, in general, qualified tuition and related expenses include non-academic fees (fees charged by an eligible educational institution that are not used directly for, or allocated to, an academic course of study) only if the fees must be paid to the eligible educational institution for the enrollment or attendance of the student at the institution.

However, based on the legislative history to section 25A, the regulations provide that qualified tuition and related expenses do not include the costs of room and board, insurance, medical expenses (such as student health fees), transportation, and similar personal, living, or family expenses, regardless of whether the fees must be paid to the eligible educational institution for the enrollment or attendance of the student at the institution. See H.R. Conf. Rep. No. 220, 105th Cong., 1st Sess., at pp. 343, 346 (1997). Further, based on the limitations in section 25A (f)(1)(B) and (c)(2)(B), the regulations provide that qualified tuition and related expenses do not include expenses that relate to any course of instruction or other education that involves sports, games, hobbies, or any noncredit course, unless the course is part of the student's degree program or, in the case of the Lifetime Learning Credit, is taken by the student to acquire or improve job skills.