Page 25

aren't required to be purchased from College W for enroll- ment or attendance at the institution. Example 3. When Marci enrolled at College X for freshman year, a separate student activity fee in addition to tuition had to be paid. This activity fee is required of all students, and is used solely to fund on-campus organiza- tions and activities run by students, such as the student newspaper and student government. No portion of the fee covers personal expenses. Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Therefore, it is a qualified ex- pense. No Double Benefit Allowed You can't do any of the following. • Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses. • Claim a lifetime learning credit for any student and use any of that student's expenses in figuring your Ameri- can opportunity credit. • Claim a lifetime learning credit based on the same ex- penses used to figure the tax-free portion of a distribu- tion from a Coverdell education savings account (ESA) or qualified tuition program (QTP). See Coordi- nation With American Opportunity and Lifetime Learn- ing Credits in chapter 6 and Coordination With Ameri- can Opportunity and Lifetime Learning Credits in chapter 7. • Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an em- ployer. See Adjustments to Qualified Education Ex- penses next. Adjustments to Qualified Education Expenses For each student, reduce the qualified education expen- ses paid by or on behalf of that student under the follow- ing rules. The result is the amount of adjusted qualified education expenses for each student. Tax-free educational assistance. For tax-free educa- tional assistance received in 2022, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. See Academic period, earlier. Some tax-free educational assistance received after 2022 may be treated as a refund of qualified education ex- penses paid in 2022. This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2022 for qualified education expenses paid on behalf of a student in 2022 (or attributable to en- rollment at an eligible educational institution during 2022). If this tax-free educational assistance is received after 2022 but before you file your 2022 income tax return, see Refunds received after 2022 but before your income tax return is filed, later. If this tax-free educational assistance is received after 2022 and after you file your 2022 income tax return, see Refunds received after 2022 and after your income tax return is filed, later. Tax-free educational assistance includes: • The tax-free part of scholarships and fellowship grants (see Tax-Free Scholarships and Fellowship Grants in chapter 1); • The tax-free part of Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chap- ter 1); • Employer-provided educational assistance (see chap- ter 10); • Veterans' educational assistance (see Veterans' Ben- efits in chapter 1); and • Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assis- tance. Generally, any scholarship or fellowship grant is treated as tax free. However, a scholarship or fellowship grant isn't treated as tax free to the extent the student includes it in gross income (the student may or may not be required to file a tax return for the year the scholarship or fellowship grant is received) and either of the following is true. • The scholarship or fellowship grant (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education ex- penses as defined in Qualified education expenses in chapter 1. • The scholarship or fellowship grant (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education ex- penses as defined in Qualified education expenses in chapter 1. A student can't choose to include in income a scholarship or fellowship grant provided by an In- dian tribal government that is excluded from in- come under the Tribal General Welfare Exclusion Act of 2014 or benefits provided by an educational program de- scribed in Revenue Procedure 2014-35, section 5.02(2) (b)(ii), available at IRS.gov/irb/2014-26_IRB#RP-2014-35. You may be able to increase the combined value of an education credit if the student includes some or all of a scholarship or fellowship grant in income in the year it is received. For examples, see Coor- dination with Pell grants and other scholarships, later. Refunds. A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Some tax-free educational assistance received after 2022 may be treated as a refund. See Tax-free educational assistance, earlier. Refunds received in 2022. For each student, figure the adjusted qualified education expenses for 2022 by CAUTION ! TIP Chapter 3 Lifetime Learning Credit Page 25