E.I.C Para El Estado De Texas

Department of the Treasury
Internal Revenue Service

Publication 970
Cat. No. 25221V

Tax Benefits
for Education
For use in preparing

2011 Returns

Contents
What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .

2

1. Scholarships, Fellowships, Grants, and
Tuition Reductions . . . . . . . . . . . . . . . . . . . . . . 4
Scholarships and Fellowships . . . . . . . . . . . . . . . . . 4
Other Types of Educational Assistance . . . . . . . . . . 6
2. American Opportunity Credit . . . . . . . . . . . . . . . 8
Can You Claim the Credit . . . . . . . . . . . . . . . . . . . . 8
What ExpensesQualify . . . . . . . . . . . . . . . . . . . . . 9
Who Is an Eligible Student . . . . . . . . . . . . . . . . . . 12
Who Can Claim a Dependent’s Expenses . . . . . . . 13
Figuring the Credit . . . . . . . . . . . . . . . . . . . . . . . . 14
Claiming the Credit . . . . . . . . . . . . . . . . . . . . . . . . 15
When Must the Credit Be Repaid
(Recaptured) . . . . . . . . . . . . . . . . . . .. . . . . 16
Illustrated Example . . . . . . . . . . . . . . . . . . . . . . . . 16
3. Lifetime Learning Credit . . . . . . . . . . . . . . . . . . . 20
Can You Claim the Credit . . . . . . . . . . . . . . . . . . . 20
What Expenses Qualify . . . . . . . . . . . . . . . . . . . . 21
Who Is an Eligible Student . . . . . . . . . . . . . . . . . . 24
Who Can Claim a Dependent’s Expenses . . . .. . . 24
Figuring the Credit . . . . . . . . . . . . . . . . . . . . . . . . 24
Claiming the Credit . . . . . . . . . . . . . . . . . . . . . . . . 25
When Must the Credit Be Repaid
(Recaptured) . . . . . . . . . . . . . . . . . . . . . . . . 25
Illustrated Example . . . . . . . . . . . . . . . . . . . . . . . . 25
4. Student Loan Interest Deduction . . . . . . . . . . . . 30
Student LoanInterest Defined . . . . . . . . . . . . . . . 30
Can You Claim the Deduction . . . . . . . . . . . . . . . . 33
Figuring the Deduction . . . . . . . . . . . . . . . . . . . . . 33
Claiming the Deduction . . . . . . . . . . . . . . . . . . . . 34
5. Student Loan Cancellations and
Repayment Assistance . . . . . . . . . . . . . . . . . . 36
Student Loan Cancellation . . . . . . . . . . . . . .. . . . 36
Student Loan Repayment Assistance . . . . . . . . . . 36
6. Tuition and Fees Deduction . . . . . . . . . . . . . . . . 38
Can You Claim the Deduction . . . . . . . . . . . . . . . . 38
What Expenses Qualify . . . . . . . . . . . . . . . . . . . . 38
Who Is an Eligible Student . . . . . . . . . . . . . . . . . . 40
Who Can Claim a Dependent’s Expenses . . . . . . . 40
Figuringthe Deduction . . . . . . . . . . . . . . . . . . . . . 41
Claiming the Deduction . . . . . . . . . . . . . . . . . . . . 42
When Must the Deduction Be Repaid
(Recaptured) . . . . . . . . . . . . . . . . . . . . . . . . 42
Illustrated Example . . . . . . . . . . . . . . . . . . . . . . . . 42
7. Coverdell Education Savings Account
(ESA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 45
What Is a Coverdell ESA . . . . . . . . . . . . . . . . . . . 45
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Rollovers and Other Transfers . . . . . . . . . . . . . . . 49
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

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8. QualifiedTuition Program (QTP) . . . . . . . . . . . . 55
What Is a Qualified Tuition Program . . . . . . . . . . . 55
How Much Can You Contribute . . . . . . . . . . . . . . . 55
Are Distributions Taxable . . . . . . . . . . . . . . . . . . . 55
Rollovers and Other Transfers . . . . . . . . . . . . . . . 58
9. Education Exception to Additional Tax
on Early IRA Distributions . . . . . . . . . . . . ....