Can I use my judgment in deciding on a Qual. Tuition and Related Expense?

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This topic contains 4 replies, has 2 voices, and was last updated by  Dyons 6 months, 1 week ago.

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  • #2268

    Dyons
    Participant

    I have a question about Qualified Tuition and Related Expenses (QTRE), specifically how much of it is what the school decides (based on their understanding of the IRS rules) and how much of it can be the taxpayer’s judgement.

    My son’s school has provided what they consider QTRE in Box 1 of his 1098-T. (They helpfully provided a document identifying what the QTRE includes – Tuition, of course, but also Student Activity fee, College fee, Technology fee, Wellness fee, Drug Testing fee, and Lab expenses for various classes. In keeping with IRS rules, they point out that insurance fees, health fees, student athletic fees and any administrative fees are NOT QTRE.)

    My question is about a specific fee charged by the school for a very specific matter: My child is a cadet at a Marine Academy and, as a part of his degree, which includes getting a third mate’s license, is required to spend mandatory time (45-90 days) at sea each year. This is done on a training ship owned by the school – a fully accredited school, by the way. We had to pay for something called a “Ship maintenance fee” as a part of his college fees.

    This does not seem to have been included in the QTRE and I wonder why not. (The school did not offer any explanation when I called to inquire.) After all, being on board the training ship is necessary (indeed mandatory) for graduation from this marine academy, and this is not a student-specific charge peripheral to the degree requirements. My question is: can I include this in calculating the actual (in my opinion) QTRE?

    Can I use my judgement, in this specific case, to include this “maintenance fee” in QTRE despite the fact that the school did not?

    Any response would be appreciated. Thanks very much in advance.

    #2270

    Kaye Thomas
    Moderator

    Claiming an additional amount will cause a mismatch that will presumably be flagged by an IRS computer and may lead to an inquiry. The IRS may or may not accept your argument. I’m wondering if the fee might be considered in the nature of room and board, which is not allowed as QTRE, even if it is required to be paid as part of the course of study.

    #2272

    Dyons
    Participant

    Thanks very much for your response.

    In fact, the curious thing is that the school has specifically allowed room and board on the ship during the 45-90 day “sea term” as an allowed QTRE, while noting that room and board on shore (during the spring and summer terms) are not QTRE.

    Thus, excluding the fees for the maintenance of the ship from QTRE appears somewhat arbitrary and capricious.

    I guess the burden is on me as a taxpayer to decide if I would like to face a potential IRS inquiry if claiming it. My question is if the IRS accepts the school’s view on QTRE as definitive or are they open to interpretations by the taxpayer? Your thoughts on this would be appreciated.

    Thanks again.

    #2273

    Kaye Thomas
    Moderator

    You are not bound by the figures provided by the school, but should be sure to attach to your return an explanation of any change. Here’s what I find in the regulations:

    (iii)Nonacademic fees. Except as provided in paragraph (d)(3) of this section, qualified tuition and related expenses include fees charged by an eligible educational institution that are not used directly for, or allocated to, an academic course of instruction only if the fee must be paid to the eligible educational institution for the enrollment or attendance of the student at the institution.

    (3)Personal expenses. Qualified tuition and related expenses do not include the costs of room and board, insurance, medical expenses (including student health fees), transportation, and similar personal, living, or family expenses, regardless of whether the fee must be paid to the eligible educational institution for the enrollment or attendance of the student at the institution.

    The fact that there is a separate room and board charge would seem to negate the possibility that the maintenance charge falls into the room and board category. Notice they don’t allow “transportation.” It’s possible someone decided it falls in that category and isn’t allowed. That would be a judgment call. One other issue: is this fee paid to the educational institution? If it is a required fee, but paid to some other entity, it appears not to be allowed.

    • This reply was modified 6 months, 1 week ago by  Kaye Thomas.
    #2275

    Dyons
    Participant

    Thanks again for your thoughtful response, Kaye.

    Responding to two points you raised:
    1) No, the “maintenance fee” is included as a part of the fees for the “summer sea term”, as the marine academy calls it. It is paid to the school, and to no other entity – just like the spring and summer “shore” terms.
    2) There is a “transportation fee” also included for the summer sea term. This is a non-QTRE, as per the rules you quoted. This transportation is for a cadet to fly to a foreign port where the ship is docked to start his sea term, or to fly back to the US after his 45 day term ends. (The ship goes from the academy in the US to Europe and back.)

    Thus, one again, this “maintenance fee” appears to be something special. It is not student-specific, essential for their degree (licensing requirements) and seems to meet all the conditions of a QTRE. However, for reasons best know to them, the school does not think so.

    The question is if I can.

    Thanks again.

    • This reply was modified 6 months, 1 week ago by  Dyons.
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